Saturday's deadline for Yahoo to respond to Microsoft's takeover overtures has come and gone. On April 5, Microsoft CEO Steve Ballmer promised Yahoo CEO Jerry Yang that if that happened, Microsoft would "take our case directly to your shareholders, including the initiation of a proxy contest to elect an alternative slate of directors for the Yahoo board." Which is exactly the kind of action we need around here. So when can we expect the scrum to start? Microsoft executives hope not soon — or ever.

A source close to Yahoo, closer yet to its Media Group, tells us that the emotional strain of February's layoffs, and more expected to come if the Microsoft deal goes through, has Yahoos in the grip of fear. "The big push inside of Yahoo right now is for everyone to justify what they're doing for a living," our source tells us.

AOL has acquired Fantasy Football site Fleaflicker. The buy comes just days after AOL News and Sports VP Lewis Dvorkin announced plans to leave the company. [PaidContent]

BoomTown's Kara Swisher reports that Digg is very much still for sale. Google, sources tell Swisher, is the "odds-on favorite" to buy Digg "much sooner than later." The social news site, which built its initial following largely on former cable-TV host Kevin Rose's charm, has always had sale rumors swirling about; Digg's bank, Allen & Co., has been trying to sell the company for months. In early March, TechCrunch reported that Google and Microsoft were locked in a bidding war over Digg, offering $200 million or more. If Google did purchase Digg, its whiny users would inevitably complain.They'd be wrong to. Google would quickly fix our biggest problems with Digg: lethargic site response and pathetic search.

In deals like the potential Yahoo-Microsoft merger, "speed is of the essence," Microsoft CFO Chris Liddell said during yesterday's earnings call. But since Microsoft offered to buy Yahoo in February, this one "has been anything but speedy." Microsoft's options, Liddell told analysts on the line, are to bring the "offter to Yahoo's shareholders," "withdraw our offer," or "consider other investments." Liddel said raising its bid is not such an option:

Apple has long served as a haven in the Valley for engineers with a taste for hallucinogens and pacifism. The same can not be said of PA Semi, which Apple recently acquired. The PWRficient processor was an instant hit among defense contractors building the latest in hyper-efficient killing technology, such as Curtiss-Wright Controls. As the EE Times reports:

Yahoo CEO Jerry Yang's delay tactics may be working. Microsoft employees are more opposed to merging with Yahoo now than they were when CEO Steve Ballmer first made his offer in February. Some of these wary employees are leaving Microsoft, "rank-and-file workers and executives" told the Wall Street Journal.

First Microsoft CEO Steve Ballmer wielded the stick — promising two and half weeks ago that if Yahoo's board failed to begin merger negotiations by this Saturday, he would take his $31 per share offer to buy Yahoo straight to its shareholders. Now comes the carrot. Ballmer has let sources make it known that he's likely to increase his offer if Yang and the board will agree to begin formal discussions, reports the New York Post. (Photo by DBegley)

Vested employees at social network Bebo, anticipating the massive stock-options payday they'll get when AOL finalizes its $850 million purchase of their employer, have been passing around stickers that read "I, for one, welcome our new AOL overlords." One was so excited that he sent it to Valleywag — and then rapidly thought better of it, fearing that this leak of sensitive information would somehow jeopardize the merger. Such typical Valley groupthink: Yes, little programmer, the fate of the entire company is riding on your shoulders! Loose lips sink acquisitions!

Yahoo CEO Jerry Yang said once again during yesterday 's conference call with analysts that "Microsoft's proposal substantially undervalues Yahoo." According to Microsoft CEO Steve Ballmer, however, that judgment isn't up to Yang anymore. Two and half weeks ago, Ballmer and Microsoft set a deadline for Yahoo to begin negotiations before this Saturday or face a proxy fight. Speaking yesterday in Milan, Ballmer sounded ready to take his chances with Yahoo shareholders. "We are offering a lot of money," he told the crowd. "If Yahoo's shareholders like it, that's great. We are prepared to go forward without a merger with Yahoo."

Yahoo beat analyst expectations for its first-quarter revenues by $30 million, $1.35 billion to $1.32 billion. Its net income, at $542 million, was considerably higher than Wall Street had hoped for, too. But $401 million of that profit came from a noncash gain, Yahoo's take from Alibaba.com's initial public offering, from which Yahoo profited because it owns 39 percent of Alibaba Group, Alibaba.com's parent company. Investors have taken this caveat into account, bidding Yahoo's stock slightly down in after-hours trading. Commenter WagCurious wants to tar and feather Yahoo CFO Blake Jorgensen for including these gains in Yahoo's quarterly revenues. But one-time gains like this are a well-understood phenomenon, and there's nothing unusual about Yahoo's treatment of it. If nothing else, Wall Street understands making money from buying and selling pieces of companies.

A tipster writes to confirm our hunch that Yahoo is putting the squeeze on expenses:

The longer Microsoft's bid for Yahoo drags on, the more annoying it gets. Jerry Yang was surely hoping that today's financials would settle the matter, as were many inside and outside his company. Wall Street hates uncertainty, and so does Silicon Valley's careerist corps of engineers. No such luck. Yahoo's earnings were good, but not good enough to be decisive and prompt Microsoft to bid more. But really, why would it? Microsoft's $31 a share offer wasn't predicated on Yahoo's current performance, but what Microsoft managers thought they could do with Yahoo if they got their hands on it. If Steve Ballmer wanted this to be over with quickly, he'd simply offer more than $31 a share; that he hasn't is the best indicator of his low opinion of Yang and his crew.

Microsoft CEO Steve Ballmer is well aware of the whispered expectations that Yahoo will beat the street with its first-quarter results this afternoon. In fact, Ballmer already has Microsoft PR pouring cold water on calls for Microsoft to respond with a higher bid. "We think we can accelerate our strategy by buying Yahoo and will pay what makes sense for our shareholders," Ballmer said in a statement. "I wish Yahoo all the success with its results, but it doesn't affect the value of Yahoo to Microsoft." Which is a remarkable display of logic from Ballmer: After all, Yahoo's current stock price doesn't reflect its underlying business performance, good, bad, or indifferent; it's a reflection of Wall Street oddsmaking on whether a Microsoft buy will go through, and at what price.

Former Yahoo Kevin Cheng notes that Yahoo has introduced a feature called "radial search," which allows users to search for businesses within a specified area. Wholly unremarkable, except for this: Cheng says he designed the feature in early 2006, and it's taken two years to come to fruition. Google would simply launch the feature; Microsoft would throw programmers at it until it got done. No wonder why Microsoft wants to buy Yahoo, and Jerry Yang wants it to pay a higher price for his creation. Who knows how much buried treasure lies within Yahoo, waiting for competent technical management to dig it up and bring it to market? (Screenshot by kev/null)

Yahoo reports first-quarter earnings later today. Everyone agrees CEO Jerry Yang has to report better-than-expected numbers if Yahoo hopes to continue fighting for its independence from Microsoft. So guess what? Yahoo is going to report better-than-expected numbers. "In any Internet business, you can pull the stops out in any one or two quarters," Jeffrey Lindsay, an Internet analyst at Sanford C. Bernstein, told the WSJ. "They'd be very crazy not to." If he's getting pressure from Yang, here are three ways for CFO Blake Jorgensen could cook the books for today's report and keep his sanity:

We've boiled Citi analyst Mark Mahaney's expectations for Yahoo's earnings report later today down to three bullet points:

Yahoo will report its first-quarter results tomorrow. CEO Jerry Yang's last message to shareholders, a March presentation in which he promised shareholders a 72 percent revenue increase by 2010, indicates the company will do everything it can to report only good news — even, as BoomTown's Kara Swisher writes, if that means "selling everything not nailed down at Sunnyvale HQ."

As a part of a new "blogging services" strategy, blog software firm Six Apart has acquired social media applications builder Apperceptive and launched a new ad network. SAI questions whether the world needs another ad network. It doesn't. But we also wonder about Six Apart's timing. Why not launch the ad network during Ad:tech a week earlier? The Moscone Center crowd might have liked to lay some bets on some SXSW-style kickball action organized by publicly snarky, privately earnest Six Apart marketing guru Anil Dash. All we got were booth babes in fishnets.

Microsoft has acquired Xobni, likely for more than its original $20 million offer to buy the company, TechCrunch's Michael Arrington reports. Xobni — "inbox" spelled backward — adds features to Outlook, Microsoft's desktop email application. As VC blogger Fred Wilson notes, the acquisition is "sort of proof that Microsoft doesn't know how to improve its own software. So they buy those that do." If Arrington's report proves more accurate than previous rumors of a sale, Xobni CEO Jeff Bonforte would join Microsoft well before his former colleagues at Yahoo, where Bonforte worked just long enough to be paid to leave.