According to Associated Press Microsoft’s directors yesterday considered upping their bid for Yahoo! According to the Wall Street Journal they did not make a final decision.

Microsoft has two other alternatives: (1) To give up acquiring Yahoo! (it is just too expensive) or (2) withdraw the bid, wait for the stock price to fall and go for a hostile bid.

Microsoft had given Yahoo! until 26 April to accept its US$41.8bn bid, which Yahoo has said is inadequate.

According to the BBC Microsoft may up its bid from $31 to $33 per share, but Yahoo shareholders are hoping for $35 to $37 per share.

Microsoft desperately needs Yahoo!s web content and search engine to meet the threat from Google, as its own web adventures have been halfhearted at best.

Our guess? Microsoft will get what it wants, simply because the Yahoo! leadership has been unable to develop a viable alternative. A merger with AOL — which has been proposed — makes no sense to us, as AOL is nothing but a weak and less innovative copy of Yahoo!

Microsoft will at least give Yahoo! a strong financial clout.

See also: Microsoft Says They’ll Pay More for Yahoo (Seeking Alpha April 30 2008)