• The Wall Street Journal, Wednesday, February 20, 2008 12:15 PM

Investors have plunged Microsoft's stock 14 percent since the company announced its intention to acquire Yahoo. The original cash and stock offer of $31 per share has now dropped to $28.89. Meanwhile, Yahoo shareholders are holding firm at $29.01 per share, indicating they remain confident that Microsoft will increase its original offer.

Just about everybody thinks Microsoft will get Yahoo in the end. However, there are many ways to arrive at the inevitable, some of them more hostile than others. Most Yahoo investors (except those who own more Microsoft stock) want Microsoft to up its offer; some think Yahoo's standoff will bare fruit, while others think a proxy contest to replace Yahoo's board could deliver a higher sale price. Meanwhile, the board is scrambling to find a better offer, because a better offer would force Microsoft to up the bid.

There's pressure on the Microsoft side, too, because even in a proxy fight the software giant would have to persuade Yahoo shareholders to elect its representatives. Over the last five years, 63 percent of hostile approaches resulted in the bidder raising their initial offer. Meanwhile, less than five percent of all proxy fights since 2001 were waged as part of a hostile acquisition attempt-and just five of the 27 tussles produced board seats for the hostile bidder.

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