Sources told the press that Microsoft's board convened yesterday but failed to reach a decision on the company's bid for Yahoo. The Wall Street Journal alleges that people familiar with the matter told them the Redmond company could not agree whether to raise the bid or take the hostile path, or ditch the deal altogether.

This may well be the end of Microsoft's pursuit of the Microhoo deal, as it appears that Yahoo's largest shareholders, which were allegedly contacted directly in light of a possible coup, are not willing to sell off to Microsoft.

Last week, Ballmer said Microsoft could take into consideration to stop pursuing a deal with Yahoo, however, most analysts dismiss this option. Neither of the companies wished to comment on Wednesday. Yahoo is expected to hold a meeting of its own on Friday, a person familiar with the company revealed.

After months of failed negotiations, Microsoft gave Yahoo an ultimatum in an April 5 letter, stating that if the two companies will not begin a negotiation on a definitive agreement within three weeks, they will take the case directly to the shareholders and start a proxy contest to elect a slate of directors for Yahoo board. However, the deadline, which was due this week, expired silently for both sides.

The initial offer made by Microsoft on February 1 was $31 a share, adding up to a grand total of approximately $44.6 billion, but after a downfall in Microsoft’s shares, it is now worth about $42 billion, still making it, if finalized, the biggest-ever takeover in the high-tech industry.

In February, Microsoft’s Chief Software Architect Ray Ozzie said the company is not in a hurry to merge its technology platform to that of Yahoo, should the deal be completed. Ozzie commented in an interview with the Financial Times that “technology companies, if they dive in and just smash things together for smashing them together’s sake, it’s reckless, it’s just simply reckless,” adding that Yahoo has its own technologies and corporate culture.

At the same time, Ozzie declared himself optimistic that Microsoft will be able to achieve its main goals if the deal with Yahoo will materialize, as long as they will focus on giving users and advertisers the same experience, rather than rushing into getting financial benefits from the deal.

Update: According to Silicon Alley Insider, Steve Ballmer said during a Town Hall conference call with Microsoft  employees that a decision about the company’s attempt to take over Yahoo will be announced "in a very short order".

Steve Ballmer said Microsoft is considering one of three options. “There’s the friendly deal, there’s an unfriendly deal, third path is simply to walk away,” he explained.

Also, according to Ballmer’s comments, it is unlikely that Microsoft will increase its offer for Yahoo.“I know exactly what I think Yahoo is worth and I won’t go a dime above”, he said.