So far, Microsoft has no comment on the Yahoo rejection, a spokeswoman just told me.

Meanwhile, Seattle-based McAdams Wright Ragen analyst Sid Parakh issued a research note this morning outlining the potential courses Microsoft could take in response to Yahoo's rejection of its $44.6 billion, or $31-per-share, buyout offer.

The most obvious choice, and the one that Yahoo's board seems to be hinting at with its rejection statement today, is for Microsoft to up the price. "We expect Microsoft to be willing to pay up to ~$35 per share, going as high as $40, essentially valuing Yahoo! at $50 - $58 billion," Parakh wrote.

Another option is to "persuade shareholders to accept the offer," Parakh wrote. That's something Microsoft may already be doing, given reports that Microsoft CEO Steve Ballmer met with a major institutional shareholder last week.

Parakh does not explicitly explore the possibility of a proxy fight as other analysts have. This would involve Microsoft filing a slate of candidates for Yahoo's board of directors and convincing investors to vote for them. This truly "hostile" approach risks sending Yahoo's best employees to the exits -- and maybe to Google -- but it also potentially keeps the acquiring company from paying a premium for its target. The deadline to file for new Yahoo directors is March 13.

Parakh's third possibility is that Microsoft could also make a tender offer for Yahoo! stock. A tender offer, according to the Securities and Exchange Commission, is "a broad solicitation by a company or a third party to purchase a substantial percentage of a company's shares or units for a limited period of time. The offer is at a fixed price, usually at a premium over the current market price, and is contingent on shareholders tendering a fixed number of their shares or units."

A fourth way, Parakh suggests, is to "Offer other ways to drive co-operation (joint development, joint venture, etc.) between the two companies." That would represent an expansion of several places where the companies have formed alliances in the past, such as linking their instant messaging networks and working together -- with Google and others -- on the OpenID online digital identity program.

In general, Parakh is negative on the deal, noting that its cost is much higher if you lump in the 14 percent (and counting) hit Microsoft's shares have taken in the days since the buyout proposal was announced.

"[That] has wiped out over $43 billion (or 98% of its offer for Yahoo!) in shareholder wealth. Add to that the likely scenario in which Microsoft pays ~$50 billion for Yahoo!, Microsoft is essentially paying >$93 billion for Yahoo!"

Of course, Microsoft could walk from the deal, as CFO Chris Liddell suggested he is prepared to do in a New York Times interview we ran in today's paper. As much as he'd like to see just that, Parakh doesn't view it as a likely outcome.

"While we hope that Microsoft is unable to conclude the deal, we believe that such chances are low," he wrote.