Hard to know if there's anything more than idle speculation behind Sanderson's assessment that another Microsoft bid is "increasingly likely." Yes, Yahoo's shares have suffered, presumably making the company a bargain, but Microsoft's shares are trading at two-year lows this week, too.

Also, Yahoo is reportedly deep in talks with Time Warner about an AOL deal.

What's the latest from Microsoft executives? Craig Mundie, the company's chief research and strategy officer, was asked by Fox Business News yesterday about the possibility of Microsoft restarting its pursuit of Yahoo.

"No, I think we made our best offer," Mundie said. "I think it was a pretty good one."

I'm making some inquiries to see if that's indeed still the company line. (Update, 11:21 a.m.: A company spokesman had nothing to say in response to the Sanderson report.)

Here's Sanderson's explanation:

"Since 'walking away' from the previous YHOO offer, the OSB [online services business] division of MSFT has not come close to meeting expectations. Organic revenue growth has decelerated from 16% in March to 2% in June according to our estimates. ... At its July analyst day, Ballmer emphasized the importance of traffic and scale in the online search business. ... While emphasizing the intense investment required and importance of scale, MSFT managers were unable to identify a strategy to obtain query volume.

"OSB leadership and organizational structure remain in flux following the departure of Platform & Services President Kevin Johnson and the re-organization in July. Two months later, MSFT has yet to name a new head of OSB. ...

"Meanwhile, MSFT’s organic efforts in search are falling further behind each month. ComScore reports that MSN has lost ~260bps of U.S. search query share from a year ago to only 6.4% in August. This represents a greater than 30% drop in market share in one year. The trend implies that MSFT’s search presence is quickly on its way from being barely relevant to non-existent.

"We expect MSFT will come back with a new, but considerably lower offer than the $44.6B deal proposed on Feb. 1st. While MSFT shares are down more than 25% since the original YHOO offer in an awful macro environment, struggles in the OSB division and lack of coherent strategy have also contributed to the share price decline."

Check out Kara Swisher's take on why Microsoft-Yahoo, the sequel, ain't gonna happen.