Yahoo's Board of Directors will reject Microsoft's $31/share unsolicited bid according to a Wall Street Journal report citing unnamed sources. The decision is based on the belief the bid, which totals about $44.6 billion, "massively undervalues" Yahoo. The source said Yahoo is unlikely to consider offer less than $40/share, upping the purchase price by $12 billion.

The move signals Yahoo management may be preparing for a long battle for control of the company. They are also considering strategic alternatives such as advertising partnerships with Google (GOOG, +2.3%). In addition, Yahoo has some "poison pill" stipulations that could deter hostile takeovers, making Microsoft goal of gaining control much more complicated and unattractive. Whether this is a ploy to get a couple more dollars per share added to the bid or perhaps a genuine move to keep Yahoo's independence, it looks as though this deal will not happen as simply or quickly as some believed when Microsoft's bid was announced.

- Seeking Alpha