As was always on the cards, Yahoo has rejected Microsoft’s $44.6 billion offer for the company, holding out for an even bigger bid or a white knight partner.

It seems that the Windows and Office software giant may be prepared to increase its offer, but not by enough to satisfy the Yahoo board, which believes the company is worth far more.

However, a further rejection could lead to a hostile takeover battle which Yahoo may find difficult to fight.

Microsoft is gambling that buying Yahoo would transform both companies’ attempts to overhaul Google in search and advertising, the new gold rush on the internet. Its unsolicited offer represents a 62pc premium over the internet company’s recent share price.

However, in a Friday counter-response, Google’s Chief Executive Eric Schmidt called Yahoo CEO Jerry Yang to offer help to stall Microsoft’s bid.

Yahoo is believed to be looking at other ways to survive this “unsolicited bear-hug”, including the emergence of a rival bidder or a business tie-up with Google that will allow it to remain independent.

The Wall Street Journal reports, “No serious alternative bids have emerged, and antitrust experts say Google’s latitude to do even a business deal with Yahoo is minimal because of likely regulatory concerns. At Microsoft, optimism is growing that the $31-a-share offer for Yahoo that it made public Friday will go through in the absence of rival bids …”

There could be a long way to go yet.