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Analyst suggests Microsoft needs to boost takeover bid

One Wall Street analyst thinks Microsoft will kick in some more cash to make their takeover of Yahoo happen: necessary move or wishful thinking?

Citigroup's Mark Mahaney thinks the deal for Yahoo will happen, at a higher price than Microsoft's original offer of $31 per share, as InfoWorld noted:

"We believe that a Yahoo sale to Microsoft -- at a price higher than the initial $31 [per share] bid -- is the most likely outcome," said analyst Mark Mahaney in a research note Monday.

"We think the strategic value of Yahoo to Microsoft is very significant," Mahaney said.

Even though Yahoo may have exhausted all of its options to find an alternative to becoming part of the Microsoft behemoth, Microsoft may be equally at a loss. Microsoft has no other acquisition options that could give it a boost in search engine and paid search share the way Yahoo can.

"We're not so sure where Mahaney got his information, but if we had to guess, we'd say it's coming from Yahoo," Betsy Schiffman said on Wired Epicenter. "And we'd also guess that Yahoo is bluffing to get a higher bid."

Microsoft seems to have an advantage here. Without a competing bidder, there is little motivation for Steve Ballmer to push up the price, unless he receives pressure from Microsoft's biggest investors to put more money on the table and close the deal faster.