From this perspective, there's no way to decide whether it's a bluff or not. Microsoft is no stranger to hardball tactics, but I seriously doubt that it would turn down a good deal 4 weeks from now just because it sent this letter.

Corporate mergers -- especially when the sides aren't best friends -- are never pretty. My only question is why does Yahoo!'s board think that a giant premium is bad for stockholders? The board's only concern should be getting the best deal possible for the owners (i.e., stockholders).

As stated in the release, if the YHOO board does not accept within 3 weeks, MSFT is going hostile and will try to take over the YHOO board. A corporation does not make such public statements if it does not intend to follow through. YHOO is in trouble.

And they threaten to lower their offer, which probably didn't go unnoticed by Yahoo! shareholders:

"If we are forced to take an offer directly to your shareholders, that action will have an undesirable impact on the value of your company from our perspective which will be reflected in the terms of our proposal."

yahoo's board is in trouble, but it doesn't seem as if the shareholders are. either the merger will go through at $31/share, which is pretty good (even for those who got in at $29/share)--or the shareholders will get to vote on it in a proxy fight. the only losers in the latter scenario are those who vote in opposition to the final result. but whichever result that is, a majority of the shareholders will have believed in that outcome (either higher value with existing management or higher value with microsoft's offer) such that that outcome might actually be plausible, and we can all go forward from there.

I am a little paranoid, but am I the only one who thinks that part of the Microsoft bid is that they can shut down Zimbra, which competes with Exchange?

Personally, I think Zimbra's an awfully small fish to be a major concern in a $45 billion deal.

I'm sure it has more to do with competing with Google, but now that you mentioned it, I'd be really disappointed if Zimbra fell in the hands of Microsoft.