• TechCrunch, Monday, April 28, 2008 11:16 AM

Now that the deadline has passed, what happens next in the Microhoo saga? On April 5, Microsoft CEO Steve Ballmer hinted that a hostile takeover would follow: "If we have not concluded an agreement within the next three weeks, we will be compelled to take our case directly to your shareholders, including the initiation of a proxy contest to elect an alternative slate of directors for the Yahoo board."

In an April 25 report, Citigroup analyst Mark Mahaney said there's a 45% chance Microsoft would up its bid, a 40% chance Microsoft would go hostile, a 10% chance it walks away, and a 5% chance for Yahoo to accept the initial bid. In other words, Mahaney thinks there's a 90% chance of a deal happening in some form.

Meanwhile, TechCrunch's Michael Arrington points out that talk of a Google alternative has died down. Why? Sources tell TC that the two-week trial yielded ad revenue gains of between 80% and 100%. Regulatory issues abound with this scenario, but Arrington believes that Yahoo could get away with a deal that gives Google just a small percentage of overall queries. This would be especially lucrative if Yahoo directed its highest value queries to the search giant. Meanwhile, it's Microsoft's move.

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