Clock ticks toward Microsoft's deadline for embattled Yahoo

San Francisco: Yahoo faces a critical week that could decide whether the pioneering web company can remain independent or must surrender to an unsolicited takeover by Micro-soft.

Yahoo is racing to forge a credible alternative that lets it stay independent or at least forces Microsoft to raise its $31 a share cash-and-stock bid, now valued at $42.8 billion.

"Yahoo is willing to try things at the 11th hour, that it never felt the urgency to try," Sanford C. Bernstein analyst Jeffrey Lindsay said. "Shareholders win, either way."

"They are coming up with some of their best stuff now," he added. "We just wish they had done these things last year."

When it reports first-quarter results on Tuesday, Yahoo has perhaps a last chance to demonstrate some financial strength and progress it has made in stabilising the company's internet media and advertising business after two years of decline.

Mid-week, Yahoo is set to complete a test with Google on whether Google should run a piece of its Web search ad sales, a move sources familiar with the talks say is part of a plan to merge with Time Warner's AOL and fend off Microsoft.

But despite mounting time pressures - and veiled threats by Microsoft to walk away from the deal if it drags on - Wall Street analysts say they expect neither side to blink.

Microsoft sees the massive merger as necessary for both to effectively compete with mutual arch-rival Google. But Yahoo has impressed many analysts by managing to cobble together a scenario where it might just drive off much-feared Microsoft.

Some analysts argue Microsoft's pressure tactics could backfire and spoil hope of Yahoo's board agreeing to a deal.

"You don't win by dragging a company to the altar," Canaccord Adams analyst Colin Gillis said. "If you are going to pick a partner, treat them nice. Make them feel pretty."

If the two do not reach a deal this week, the stand-off could drag on for months.