May 3, 2008 6:15 PM PDT

Microsoft's move: Is it just a feint?

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Microsoft says its offer for Yahoo is off the table, but could this be just a negotiating ploy?

It's a natural question to ask. I mean, if Microsoft has had the hots for Yahoo for two years, can it really be so sure that it is no longer interested?

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My take is that Microsoft has ruled out two options, but that one possibility for Yahoo remains out there.

Clearly, Microsoft is not having luck getting Yahoo to consider the price it is willing to pay, so the direct option hasn't worked. CEO Steve Ballmer says that Microsoft has also ruled out going directly to shareholders, a move that would likely require a nasty, costly, and time-consuming proxy fight.

In particular, Yahoo has proven itself adept at making itself a less attractive takeover target. In addition to the usual sorts of poison pill defenses, it has found other weapons like cutting sweetheart deals for employees and negotiating a partnership with Google, the very company Microsoft is looking to rival.

Such a move might not pass regulatory muster, but Ballmer indicated in his letter to Yahoo's Jerry Yang that Yahoo's moves have succeeded in making the proxy battle sufficiently unattractive.

"Our discussions with you have led us to conclude that, in the interim, you would take steps that would make Yahoo undesirable as an acquisition for Microsoft," Ballmer wrote. "We regard with particular concern your apparent planning to respond to a 'hostile' bid by pursuing a new arrangement that would involve or lead to the outsourcing to Google of key paid Internet search terms offered by Yahoo today."

From my point of view, though, it doesn't mean Microhoo is totally dead. Even though several doors seem closed, I see one door that could swing back open. Yahoo shareholders may find it tough to swallow the fact that Yang said no to $33 a share and push him back to the negotiating table. In that scenario, the Yahoo that Microsoft finds so attractive could once again be on the market.

There's also the possibility that Yahoo tries to go it alone for a little while, stumbles, and Microsoft comes back with a new offer.

For his part, Gartner analyst Allen Weiner thinks Microsoft really did walk away. "I think the drama is pretty close to being over," he said. Microsoft and Yahoo both think they can rebuild themselves to their glory days on their own, he said.

That's not to say that a good feint can't seal a deal.

Oracle walked away from its bid for software maker BEA Systems when the companies couldn't come close to a price. But both companies returned to the table and ultimately negotiated an amicable deal. (Though it's also worth noting that Oracle ended up paying far more than its original offer.)

News.com's Stephen Shankland contributed to this report.

During her years at CNET News, Ina Fried has changed beats several times, changed genders once, and covered both of the Pirates of Silicon Valley. These days, most of her attention is focused on Microsoft. E-mail Ina.