Microsoft Corp directors failed to decide on the next step in the pursuit of Yahoo Inc, leaving open the debate over whether to walk away from the $44.6 billion bid or fight to replace the Internet company's board.

Chief Executive Officer Steve Ballmer is undecided on what to do, and his allies don't know whether he will give up or mount a hostile takeover, the Wall Street Journal reported on its website, citing people familiar with the matter.

Microsoft examined a price of $32 to $33 a share in recent days, more than the initial $31 cash-and-stock bid, the newspaper said. Raising the offer would be one way for Microsoft, the world's biggest software maker, to clinch a friendly deal with Yahoo or make it easier to win a proxy fight to oust the board.

"Steve Ballmer's not the sort of person who runs away from a fight," David Buik, a market analyst at BGC Partners, said in an interview this week. "He likes to take things head-on."

Ballmer has stood firm on the price when speaking in public and has to balance holding out to avoid over-paying and angering his shareholders with the need to pay enough to succeed in buying Yahoo and building a bigger challenger to Google Inc in the $41 billion online advertising market.

Yahoo wants an offer in the high $30s, and investors have signaled they would prefer as much as $37, the Journal said. Microsoft is reluctant to start a hostile takeover and may walk away from the offer, the Journal said.

Microsoft, based in Redmond, Washington, has said it will make a decision this week. Representatives didn't return calls from Bloomberg News. Yahoo spokeswoman Diana Wong didn't respond to a phone message.

Microsoft fell 12 cents to $28.52 in NASDAQ Stock Market trading on Wednesday.

Sunnyvale, California-based Yahoo, which has gained 18 percent this year, rose 5 cents to $27.41.

Yahoo CEO Jerry Yang says the offer undervalues his company.

Agencies

(China Daily 05/02/2008 page4)