Yahoo Inc.'s CEO Jerry Yang told employees Wednesday in an e-mail that "as we've said, no decision has been made about Microsoft's proposal. Our board is thoughtfully evaluating a wide range of potential strategic alternatives in what is a complex and evolving landscape," Reuters alleges.

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 by February after the sales in the fourth quarter dropped 23 percent.

The troubled Yahoo! is 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.

According to the company’s estimations, the net income for the last quarter ending December 31 dropped approximately 60 million dollars compared to the same period a year ago, while the operating income fell 38 percent compared to last year, to $191 million.

Microsoft was quick to exploit Yahoo's moment of weakness and Microsoft Chief Executive Steve Ballmer has made public an unsolicited $44.6 billion offer from Microsoft, 62 percent premium above Yahoo’s closing stock the previous day.

"The Microsoft interest highlights the tremendous strength of the Yahoo brand and assets," Yahoo CEO Yang said in the leaked e-mail, also praising employees by saying that their "hard work and strong commitment are more important now than ever before," MarketWatch reports.

Yahoo may not like Microsoft, but all things being equal, one has to see that Google is threatening to crush both in the advertising and search fields, which are crucial to the next period of Internet development. Google has risen from a neat search engine to an industry giant, a power player which influences a great deal the whole industry.

It's hard to tell whether selling off to Microsoft, the world's largest software maker, can be avoided while maintaining market position. Yahoo is threatened with being crushed in between the two giants so it only makes sense to sell off while there is still something worth selling.