Wow. When almost all hope was lost, when it seemed like Yahoo! was utterly doomed, along comes a fairy and blows pixie-dust up Jerry Yang's ass. Actually, it's more like an army of orcs blowing snot all over Microsoft stock, as the following diagram illustrates.

So what does Microsoft's falling stock price mean for the Yahoo! bid? First of all, it means the deal which was a cash/stock swap offer is no longer worth nearly as much as it was last week. Moreover, it means that Microsoft shareholders don't like the deal, and it means that every time one of them puts in an order to "sell!" the deal gets worse. As of this afternoon, the offer was worth about $4 BILLION less than it was last Friday and the only way to keep the overall value of the deal the same is to offer Yahoo! more cash than stock, but this is just likely to piss off MSFT shareholders even more, prompting ever more stock sell-off. And so on and so forth...

Meanwhile back at Yahoo! HQ, Yang has finally come out of hiding and issued a message to his people. To summarize: "If we keep holding off making a decision, maybe this whole thing will just go away." Based on the above scenario, this strategy just might be the best play Yahoo! could make.

Perhaps the best take yet on this soap-opera comes from Fake Steve Jobs, who likens the situation to a three-legged race. FSJ at his best.