Yahoo CEO Jerry Yang Yang's wife, Akiko Yamazaki, gave birth to the couple's second daughter this week. BoomTown's Kara Swisher reported the news, citing sources close to the company, and then warned Microsoft CEO Steve Ballmer to "give Yang a break and back off, at least for today." For Yamazaki's sake, we hope Ballmer ignores this advice and takes an upped offer to Yahoo shareholders today, while Yang's too busy in the maternity ward to fend it off. Without a job, Jerry will have no excuse to ignore the 4 a.m. wailing.

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.

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)

The Justice Department has begun an antitrust investigation into Yahoo's test of Google's search advertising technology according to an anonymous source cited by Reuters:

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.

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.

What's Yahoo CFO Blake Jorgensen so happy about? Try Yahoo's first quarter earnings on for size. Widely expected to surpass Wall Street expectations, Yahoo did not disappoint, reporting $1.35 billion in first quarter revenues after traffic acquisition costs, a 14 percent percent increase over the first quarter 2007. Still, Microsoft CEO Steve Ballmer said earlier today that positive earnings would not cause him to raise Microsoft's $31 per share offer for Yahoo. Yahoo CEO Jerry Yang, president Sue Decker and Jorgensen respond in our live coverage of Yahoo's analyst conference call, below.

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."

Let Google and Facebook play ultimate frisbee. Yahoos like balls, and they like them in the face. Their game is called Faceball. How it works: Two players sit in chairs ten feet apart and take turns throwing inflated beach balls at each other's faces. One point per facial, and no ducking. This goes on for five rounds. John Allspaw and Dunstan Orchard developed Faceball in April 2007 and ever since, Yahoos — from CEO Jerry Yang on down — have loved it. When it came time to plan the launch of Flickr Video, there was little debate as to what to do. A Faceball tournament was held on April 9, 2008. In the picture above is your winner, cofounder David Filo. Below, a video (on Vimeo, not Flickr, oddly) from Faceball creators Allspaw and Orchard describing their game, as well as more photos (on Flickr) from the tournament.

Yahoo CEO Jerry Yang, chairman Roy Bostock, and the rest of the Yahoo's board met on Friday. After reviewing the company's options — begin negotiations with Microsoft, merge Web properties with AOL, or outsource search advertising to Google — the board went with a perhaps underhyped fourth option. It postponed any decision and decided to meet again, the New York Times reports. Maybe with AOL, Microsoft, or Google representatives at the table. We'll see. Meanwhile, Yahoo executives want reporters to know that Yang should just hurry up and sell to Microsoft. Overlord-welcoming readers, by a margin of 2-to-1, agree.

Yesterday, at a luncheon with several dozen VP-level minions Yahoo CEO Jerry Yang hosted tried to explain the reasoning behind a potential deal with AOL and Time Warner. Didn't go over so well. But while many of these invitees were happy to later share their horror at the idea of merging AOL and Yahoo Web properties, none managed to grow a pair and tell Yang. Now is your chance people. Should Yahoo merge with Microsoft or take Time Warner's money? Tell us in our latest Valleywag poll.

Yahoo CEO Jerry Yang hosted a lunch for top management yesterday and tried to sell the company's overstuffed ranks of EVPs and SVPs on a mashup with AOL. No one bought it, reports BoomTown's Kara Swisher. "Look, Microsoft would not be my first choice either," one exec told Swisher. "But AOL is not even my third." Another exec said: "I cannot believe they would put our amazing assets with those who we don't really respect, for the most part, and think that's OK." Reportedly, none of the VPs at Yang's luncheon bothered speak up — the cardinal rule at Yahoo these days being not to offend Yahoo's oversensitive founder. But most want him to hurry up and close what's seen as an inevitable deal with Microsoft.

While Microsoft's Steve Ballmer and Yahoo's Jerry Yang exchange angry letters over the fate of their companies, AOL CEO Randy Falco has this for his legions:

News Corp. is now discussing a possible joint takeover bid for Yahoo with Microsoft, according to unnamed sources cited by the Wall Street Journal. Meanwhile, Yahoo is now discussing combining Internet operations with Time Warner-owned America Online as part of a three-fold move to stave off the takeover bid that includes teaming up with AOL, buying back much of the company's stock and running search ads from Google. Analysts quoted in the Journal still suggest the sale to Microsoft is a fait accompli, and that Yahoo is just trying to get CEO Steve Ballmer and company to cough up a higher bid for shares.

Yahoo CEO Jerry Yang refuses to negotiate with Microsoft, but Yahoo's largest shareholders aren't so coy. Take Legg Mason portfolio manager Bill Miller's posturing in today's Wall Street Journal, for example. Miller, responsible for the second largest stake in Yahoo, today called Microsoft CEO Steve Ballmer's weekend ultimatum to the Yahoo board a "blunder."

Bernstein analyst Charles Di Bona told clients Yahoo CEO Jerry Yang's letter to Microsoft Steve Ballmer and March 18 presentation to shareholders indicate he has lost touch with reality.