Yahoo Inc.'s board reportedly held a special meeting Friday to discuss how to handle the slumping Internet pioneer's first response to Microsoft Corp.'s week-old takeover bid, setting the stage for either a quick resolution or months of acrimonious wrangling. After fruitlessly searching for other suitors, Yahoo's options appear to have boiled down to a tough choice. In the most likely outcome foreseen by industry analysts, Yahoo will either begin negotiating the final terms of an amicable sale to Microsoft or undergo a painful reorganization that would include relinquishing control of its search engine and a big piece of its advertising to rival Google Inc. If it's rebuffed, Microsoft has indicated it may try to override Yahoo's board and take its offer directly to the company's shareholders in a battle that could drag on through the spring. Microsoft still has time to weigh its options because the deadline for nominating a different slate of Yahoo directors – a key weapon in hostile takeover attempts – isn't until March 13. Yahoo declined to confirm the Friday board meeting, which was first reported by TechCrunch, an influential blog that broke the news of Google Inc.'s acquisition of online video pioneer YouTube in 2006. Another well-regarded blog, BoomTown, reported Friday's board meeting occurred on a phone conference and that all 10 directors would convene Feb. 13 for an all-day meeting at Yahoo's Sunnyvale headquarters. BoomTown didn't identify its sources. Source : http://www.tech2.com/india/news/internet/yahoo-reportedly-mulling-microsoft-bid/28331/0
I have heard Yahoo is now mulling the idea of getting it together with AOL (Time Warner). I think any sort of alliance with Google, however, will be deemed not in the interest of the public and therefore likely to be ruled against by the DoJ even if that alliance is on non-search level. I think what will happen is that Microsoft will up its offer which will make it irreistable for the shareholders of yahoo since any in-house reorganization will likely be not looked on favourably considering they have had ample time to do that, and they have failed.