In light of recent developments, Microsoft Corp.'s (MSFT) acquisition of Yahoo! Inc. (YHOO) is all but inevitabie, Citigroup Capital Markets analyst Mark Mahaney wrote in a research note.

Mr. Mahaney said that Microsoft's evident frustration in its most recent public letter to Yahoo's board of directors could be interpreted as the best way to force the company's hand and bring closure to negotiations.

Still, the prior asking price of $31 per share in a half-cash, half-stock offer for Yahoo could be sweetened to $34 per share, which Mr. Mahaney would consider "a reasonable, valuation-supported base case for Yahoo."

He said:

In a recessionary environment, this MSFT bid accords YHOO with one of the most defensive and attractive risk-reward outlooks in the Internet sector.

Mr. Mahaney rates Yahoo as a "buy" with a $34 target price.

- FP Trading Desk, Canada's Financial Post