GREG GILBERT/THE SEATTLE TIMES

The Baudboys in concert in Building 16 on Microsoft campus.

While it may not score them points at their next performance review, the men of Microsoft's a cappella group, the Baudboys, have met their goal.

The Wall Street Journal's anonymous sources say Microsoft's board of directors is meeting now to weigh its next step in the Yahoo takeover drama. An announcement is expected at the conclusion of the meeting. Someone familiar with the matter told us earlier today that the situation is still undetermined.

Today's story on a Microsoft device that helps law enforcement gather forensic evidence from a crime suspect's computer has garnered lots of attention and raised questions about how exactly it works and what it's able to do. Update, 5:10 p.m. I just got a response from Microsoft. See the end of the post.

Mary Jo Foley explores how Microsoft employee morale has suffered since the company began pursuing its acquisition of Yahoo. She says there's a "real and prevailing sentiment among many in the Microsoft ranks" that the company should walk from the deal, no matter the price.

I've heard from a few at the company on this subject, and their thinking tends to follow these lines. But I'd love to hear from more employees.

Microsoft General Counsel Brad Smith said he had no news on Yahoo this morning when I spoke with him on the sidelines of a company conference for law enforcement officials.

After shedding 5 percent in after-hours trading Thursday, Microsoft shares dipped further this morning. The company's third-quarter earnings clearly did not delight investors.

Microsoft CFO Chris Liddell addressed the biggest outstanding issue facing his company during its third-quarter earnings conference call this afternoon: the bid to acquire Yahoo. He gave one of the strongest indications yet that Microsoft is considering abandoning the deal.

Microsoft's core operating system business saw year-over-year revenue and operating income declines in the latest quarter. Likewise, the Online Services Business -- where it competes most directly with Google, the impetus for the Yahoo acquisition -- also saw a slight decline.

Wall Street analysts had been expecting earnings per share of 44 cents. Microsoft just announced earnings of 47 cents a share. The company's third quarter revenue of $14.45 billion was right in the middle of the range it forecast in January.

Those tracking the price Microsoft has offered for Yahoo know that it fluctuates every day because half of the compensation to Yahoo shareholders would be Microsoft stock. If Microsoft continues its pattern of better-than-expected earnings releases later today, its stock, and, in turn, the compensation to Yahoo's shareholders, could jump.

Microsoft released the first service pack for Windows Vista in March. Today, it started pushing the update to its customers via Automatic Updates.

Microsoft CEO Steve Ballmer is sending more signals to Yahoo shareholders after the company's Tuesday earnings report. Take it or leave it was the message from Milan, Italy.

Microsoft Chief Software Architect Ray Ozzie continued to flesh out his "software plus services" vision with a memo to employees, which Microsoft also made available publicly.

The bottom line: Yahoo posted first quarter 2008 revenue, excluding traffic acquisition costs, of $1.35 billion. That's at the higher end of the range it issued in January and reiterated in March. Earnings per share of 11 cents beat the Wall Street consensus of 9 cents per share. But that's what everyone was expecting the company to do.

Microsoft CEO Steve Ballmer, in Morocco to launch his company's North Africa Web portal, MSN Maghreb, has taken some of the tension out of this afternoon's Yahoo earnings report. Ballmer said Microsoft is not changing its bid, which stood at $43.1 billion, at the market close on Monday, regardless of Yahoo's performance.

That's the early word from lawyers representing the plaintiffs in the suit. Remember, Microsoft was seeking to appeal the judge's class certification in the suit. With the Ninth Circuit Court of Appeals declining to take up the case, it should proceed in U.S. District Court.

More to come on this as it develops.

Update, 12 p.m.: Plaintiffs' attorney Jeffrey Thomas said by phone that his side is pleased with the Ninth Circuit's decision and "we're looking forward to proceeding with discovery."

Microsoft and Farecast are confirming the acquisition of the Seattle-based airfare prediction and travel site. A person familiar with the transaction said the purchase price was around $115 million.

I assume NPD will be out with its monthly U.S. game industry figures later this afternoon. For now, Nintendo has chimed in early with an e-mail crowing about its sales in March: More than 720,000 Wiis sold, "representing the highest monthly sales total outside of" November and December, the holiday sales period.

Updated with the full NPD report after the jump.

Microsoft CEO Steve Ballmer spoke in Seattle this morning to one of the friendliest, but also most knowledgeable and critical audiences he faces: Microsoft's Most Valuable Professionals. In a jocular, hourlong speech and conversation, Ballmer gave some unguarded assessments of his company's position in online search; its bid for Yahoo; the success of Windows Vista; and its market acceptance vs its predecessor. Here are some of the highlights:

Someone has posted to YouTube what appears to be an internal Microsoft sales music video imploring the sales force to get out and sell Windows Vista to businesses now that Service Pack 1 is available. It's unabashedly cheesy, a bit hard to watch and quickly becoming the object of ridicule around the Web. But the message in the video sheds some light on how the company's sales arm sees its most important product.

A few fun items for your afternoon perusal.

This interesting report in The Economist on how mobility is changing urban and suburban landscapes pulled some solid examples from our region. One brought to my attention is a description of the afternoon clog on Highway 520. An urban movement researcher focusing on how traffic patterns are evolving discussed in his 2006 book "a 'reverse commute' in Seattle [in which] lots of male computer scientists at Microsoft in the suburb of Redmond raced downtown to find females---a weekday ritual called 'the running of the programmers.' "

Microsoft's acquisition of Danger is complete, the company announced today.

The Microsoft employees trying out the company's new "Touchdown Space" in Seattle's South Lake Union neighborhood on Monday were impressed with the design and seemed genuinely pleased at what it could mean for their work-life balance.

Will Poole, Windows veteran, to retire from Microsoft.

Microsoft confirmed rumors reported today that the Unlimited Potential Group -- assigned to develop and market Microsoft products for people in emerging economies -- is being reorganized. Will Poole, a veteran leader who previously ran the Windows Client business, is leaving his post as co-leader of Unlimited Potential and retiring from the company this fall "to pursue philanthropic and entrepreneurial interests," Microsoft said in a statement.

Updated after the jump.

We often focus on the U.S. metrics for Internet search share and Web site traffic. But there's a whole world out there. And in Russia, at least, AOL reaches more of the population than Google, Yahoo or Microsoft.

In the midst of the maelstrom of online deals rumored to be in the works, Microsoft proposed a major plan for companies to self-regulate consumer privacy practices.

Having trouble keeping up with all the complicated deals rumored to be swirling around Yahoo and Microsoft? You're not alone. But at least one Wall Street analyst says when the dust settles, Microsoft's proposal to buy Yahoo will prevail.

Microsoft General Counsel Brad Smith just issued a statement responding to a test project between Google and Yahoo to work together on search advertising, which was just announced by Yahoo.

"Any definitive agreement between Yahoo! and Google would consolidate over 90% of the search advertising market in Google's hands. This would make the market far less competitive, in sharp contrast to our own proposal to acquire Yahoo! We will assess closely all of our options. Our proposal remains the only alternative put forward that offers Yahoo! shareholders full and fair value for their shares, gives every shareholder a vote on the future of the company, and enhances choice for content creators, advertisers, and consumers."

MIKE SIEGEL / THE SEATTLE TIMES

Microsoft is more than doubling its new regional employee shuttle service.

Microsoft launched a free shuttle service taking employees from around the region to its Redmond campus last fall. The program has been a success, the company said today, and it will more than double later this spring.

One of the key goals of the public communications strategies that Microsoft and Yahoo are pursuing in their acquisition chess match is to sway investor opinion toward each company's position. But at least one major Yahoo investor is viewing Microsoft's ultimatum on Saturday as a "blunder."

In a pleasant break from the Microsoft-Yahoo news, an MTV News report out yesterday suggests that Microsoft is at work on a controller for the Xbox 360 that would mimic the successful motion-sensing remote controller for the Wii from Nintendo. Nintendo's top U.S. exec said in February that competitors would have a tough time copying his company's model.

Yahoo CEO Jerry Yang and Chairman Roy Bostock penned a lengthy response to Microsoft CEO Steve Ballmer's Saturday ultimatum. They're not opposed to a Microsoft takeover, it's just that "any transaction must be at a value that fully reflects the value of Yahoo!" and $31 a share ain't it.

The quiet from Sunnyvale this weekend was broken late tonight. A person familiar with the matter told Reuters that Yahoo is not against selling to Microsoft once the price is right.

Microsoft this morning released a letter from CEO Steve Ballmer to Yahoo's board of directors, reiterating many of the points the company made through the media yesterday and today. Ballmer gave the board three weeks to come to the table and negotiate an agreement.

From the letter:

"If we have not concluded an agreement within the next three weeks, we will be compelled to take our case directly to your shareholders, including the initiation of a proxy contest to elect an alternative slate of directors for the Yahoo! board. The substantial premium reflected in our initial proposal anticipated a friendly transaction with you. If we are forced to take an offer directly to your shareholders, that action will have an undesirable impact on the value of your company from our perspective which will be reflected in the terms of our proposal.

"It is unfortunate that by choosing not to enter into substantive negotiations with us, you have failed to give due consideration to a transaction that has tremendous benefits for Yahoo!'s shareholders and employees. We think it is critically important not to let this window of opportunity pass."

Full text of the letter is after the jump.

Last night, U.S. District Court Judge Marsha Pechman granted Microsoft's request to halt proceedings in the "Vista Capable" class action lawsuit pending results from the company's appeal to the Ninth Circuit Court of Appeals. More details coming...

Another day, another anonymously sourced report on meetings between Microsoft and Yahoo in The Wall Street Journal. At least it's Friday.

Brian Pertl has been at Microsoft since 1992. He heads up a small group in charge of media acquisitions. Now he's going to be dean of a music school. Update, Friday morning: Listen to a clip of Pertl's music after the jump.

Makers of ultra-low-cost PCs (ULPCs) such as ASUS and Intel can install Windows XP Home until June 30, 2010, or one year after the general availability of Windows 7, whichever is later, Microsoft said today. But isn't Windows 7 supposed to be available in 2010?

Readers more familiar with Microsoft's Employee Stock Purchase Program than I am pointed out a better way to evaluate the data the company filed with the Securities and Exchange Commission earlier this week. I wrote that Microsoft employees, per capita, bought fewer shares of stock through the program in each of the past two years.

Nearly two years ago, Symantec sued Microsoft, alleging a host of business misdeeds. Today, a judge in Seattle granted the companies' joint request to dismiss the suit.

"There's no reason to bid against ourselves," someone close to Microsoft told The Wall Street Journal. The unnamed sources for the story insist "the stance isn't posturing."