As previously rumored, Yahoo Inc. has officially rejected the buyout offer from Microsoft. The Wall Street Journal previously reported that the company officials want at least $40 per share, which means around $12 billion more than the $44.6 billion, or $31 per share, offer.

However, Microsoft isn't ready to let go. "It is unfortunate that Yahoo! has not embraced our full and fair proposal to combine our companies. Based on conversations with stakeholders of both companies, we are confident that moving forward promptly to consummate a transaction is in the best interests of all parties," the Redmond company said in a statement.

Yahoo was advised by Goldman, Sachs & Co., Lehman Brothers and Moelis & Company on the Microsoft deal. In the meantime, Yahoo may be evaluating the possibility to restart merger negotiations with AOL, which is owned by Time Warner. Previous talks between Yahoo and AOL have failed due to economic reasons, but at times like this, any option seems to be better than the $45 billion offered by Microsoft.

"As we have said previously, Microsoft reserves the right to pursue all necessary steps to ensure that Yahoo!’s shareholders are provided with the opportunity to realize the value inherent in our proposal," Microsoft further said.

The prospects for the second largest search engine on the Internet, Yahoo, are less than perfect after the company announced it would cut 1,000 jobs after the sales in the fourth quarter dropped 23 percent. The troubled Yahoo! is, however, fighting to regain its financial strength and announced it is selling its digital music subscription service, Yahoo Music Unlimited, to Rhapsody America. Rhapsody is a partnership of Real Networks and MTV Networks.

Also, Terry Semel, former CEO of Yahoo, resigned as chairman of the board. In June Semel stepped down from the position of Yahoo’s chief executive after six years at the post, and was replaced by Jerry Yang, one of the original co-founders of Yahoo. In 2006 investors lost confidence in him when Yahoo lost ground in Internet advertising to Google.