Rumor has it that Microsoft and Yahoo! are finally talking.  What could have caused this change in approach by Yahoo!  It could be that Jerry Yang has decided that the Microsoft could be in the best interest of shareholders.  Or it could be that Yahoo! is starting to see how its first quarter numbers are shaping up. 

If the numbers are below the street estimates then Jerry and the Board will take some major heat for not embracing the Microsoft offering (also some serious lawsuits).  In that case, management will lose even more of its credibility with the street.  Its share price will drop and Microsoft could reduce its offering and still have a chance to close the deal.  If this occurs, there will be no other options for Yahoo! but to take the offer.

To avoid that scenario, it is Yahoo! interest to negotiate before its numbers are finalized so that it can strike the best deal for its shareholders. 

If however Yahoo! has  blow out quarter then it makes sense for it to wait until their numbers are released to show that the Microsoft offer is too low.  By doing this they can either defeat the advances of Microsoft or get Microsoft to raise its offer by $5 or so billion dollars.

There is no love lost for Microsoft at the senior level of Yahoo! so I have to lean that financially Yahoo! is not doing as well as it expected.