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.

According to Ed Bott over at ZNet the case for Windows Vista Service Pack 1 just got a lot stronger.

“When SP1 ships sometime in early 2008, it will strip away one of Vista’s most annoying features and remove one of the most persistent objections to Vista’s adoption.”

Microsoft will remove the reduced functionality mode — the so-called “kill switch” — from the operating system, “restoring the Windows Genuine Advantage (WGA) program to its original role as a series of persistent but nonlethal notifications”.

WGA senior product manager Alex Kochis talking to reporters and analysts, said, “Based on customer feedback, we will not reduce user functionality on systems determined to be non-genuine”.

With SP1 installed, a Windows Vista system that fails validation, which Microsoft terms “non genuine”, will continue to work exactly as before, except for some minor annoyances. The desktop background will be black. If you change it, a scheduled task will paint it black again one hour later, and you’ll see a small “Activate Now” alert in the same location, which apparently you can ignore.

Sounds hairy, though.

If you do, take a look at Microsoft’s new website devoted to just that.

“Seeing Windows Vista for the first time may leave you searching for words. Many people just say “Wow.” Here are 100 reasons why.”

Here are a just a few of the “reasons” :

#1. It makes using your PC a breeze.
Windows Vista features a breakthrough design and easy-to-use organizational tools that make it simpler to get things done and get on with life! Find what you need instantly, on your PC or on the web, with Instant Search. Bring more clarity to your tasks with the spectacular Windows Aero user experience and Windows Flip 3D, allowing you to see everything you’re working on at a glance.

#9. Unchain your mobile PC.
Network and Sharing Center lets you set up a wireless network at home so you can experience the freedom of working from your living room, backyard, or anywhere in your home.

#15. Because your PC remembers to back up for you.
Windows Backup and Restore Center offers improved backup and restore functions, with automatically scheduled backups to preserve priceless digital photos, music, movies, and documents.

#23. Because it’s like a digital candy store.
You choose the fun—TV, games, music, movies, home videos, or photo slide shows—Windows Vista has all of your entertainment in one convenient place. Enjoy it on your PC, or gather friends and family around your home entertainment center, and let the good times roll!

Fair enough, but will anyone read the whole 100 reasons?

Microsoft has updated its browser, Internet Explorer Version 7 (IE7). The IE Blog posts this advice :

“Almost a year ago, we released Internet Explorer 7 for Windows XP. Since then, IE7 is well on its way to becoming the most used browser in the world, and we’ve seen lots of evidence that IE7 makes it safer and easier to accomplish everyday tasks online. For example, the built-in Phishing Filter has protected consumers from known phishing web sites an average of 900,000 times per week. IE7 is the first – and still the only – browser with native support for Extended Validation SSL Certificates that help prevent online fraud. (Of course, tabbed browsing, QuickTabs, shrink-to-fit printing, an easily customizable search box, CSS improvements, and some add-ons are all good things too.)”

How to get it : “If you are not already running IE7, you can get it now from the Internet Explorer home page on Microsoft.com, get a customized version from a third-party site, or, if you haven’t already received it via Automatic Updates, this version will be delivered to you as we described previously. If you are already running IE7, you will not be offered IE7 again by Automatic Updates.”

Some changes have been made for XP users :

* The menu bar is now visible by default.
* The Internet Explorer 7 online tour has updated how-to’s. Also, the “first- run” experience includes a new overview.
* We’ve included a new MSI installer that simplifies deployment for IT administrators in enterprises.