Reports emerged today that Yahoo's board will be formally rejecting Microsoft's $44.6 billion takeover bid for Yahoo on Monday, according to "a person familiar with the situation",

Formal details will be revealed Monday but one of the claims is that the bid "massively undervalues" Yahoo. Analysts, however, say that the Yahoo board is obligated to reject Microsoft's first offer as a duty to their shareholders to get the best possible price for the company.
"You would expect Yahoo's board to reject Microsoft at first," Marlin said. "If they didn't, they would be accused of malfeasance."

Others speculate that Microsoft is prepared to up their bid from $31/share to as high as $35/share as part of the negotiation. This being said, its been no secret that Yahoo's co-founder and CEO, Jerry Yang, is reluctant for his company to join Microsoft.

If this rejection is final, however, Microsoft has the option of taking the matter directly to the shareholders, and bypass the board of directors entirely.