Wall Street analysts see Microsoft bid going hostile

By Eric Auchard and Daisuke Wakabayashi

SAN FRANCISCO/SEATTLE (Reuters) - An overwhelming majority of Wall Street analysts see Microsoft Corp preparing shortly to launch a hostile bid at its current price of $31 per share in cash and stock, a Reuters poll found.

Most Wall Street analysts believe Microsoft now faces a drawn-out proxy campaign to win its unsolicited takeover of Yahoo, according to the poll.

By contrast, the general view in February when Microsoft announced its offer was that Yahoo would agree to a friendly merger if Microsoft only sweetened its bid. By mid-March a Reuters poll showed that Wall Street expected Microsoft to buy Yahoo without raising its price.

Microsoft last week repeated Chief Executive Steve Ballmer's 3-week-old threat that his company will go hostile, or even call off its bid, if Yahoo did not agree to a deal before this weekend. Microsoft executives said they will reveal their next move this week.

"I'm betting that Ballmer is bluffing with his 'walk away' comments and that he's going hostile," said Jefferies & Co analyst Youssef Squali, who believes Microsoft will stick with its current $31-per-share offer.

Nineteen brokerages now say they expect Microsoft in coming days to move forward with a hostile bid after being frustrated in a three-month effort to entice Yahoo to reach a negotiated deal, the survey reveals.

By contrast, only three brokerages see the possibility that the two sides will end their standoff over price and begin negotiations to reach a deal at a slightly higher price than the initial offer, which had been worth $31 per share in cash and stock, or $44.6 billion.

Due to a drop in Microsoft stock, it is now worth $42.7 billion.