• The New York Times, Tuesday, February 12, 2008 11 AM

The battle for Yahoo's independent future is getting ugly. The playground-like war of words between Microsoft and Yahoo has escalated. In response to Yahoo's rejection of the $45 billion bid as "substantially" undervaluing its assets, Microsoft hit back, calling the response "unfortunate and insisting that Microsoft's proposal was "full and fair."

Yahoo is frantically searching for alternatives to try and force Microsoft into upping its bid price (which at the time represented a 62 percent premium on Yahoo's stock price). Microsoft shareholders, less than impressed with the bid, have cut more than $4 from the software giant's share price, shaving $40 billion from its market valuation. And because the offer is a 50/50 cash and stock split, the bid's value has now decreased from $31 to $29 per share. In a sense, Microsoft has already paid for Yahoo once, so an enhanced bid looks unlikely.

Even so, Microsoft isn't putting its gloves down. It may offer directly to shareholders in an attempt to oust Yahoo's board of directors. But most think the tussle represents the beginning of negotiations, as neither party wants to see a hostile takeover.

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