The press release leaves plenty of room for interpretation, while providing little info:
“In light of developments since the withdrawal of the Microsoft proposal to acquire Yahoo! Inc., Microsoft announced that it is continuing to explore and pursue its alternatives to improve and expand its online services and advertising business. Microsoft is considering and has raised with Yahoo! an alternative that would involve a transaction with Yahoo! but not an acquisition of all of Yahoo! Microsoft is not proposing to make a new bid to acquire all of Yahoo! at this time, but reserves the right to reconsider that alternative depending on future developments and discussions that may take place with Yahoo! or discussions with shareholders of Yahoo! or Microsoft or with other third parties.What's all this mean? There are several scenarios being rumored, but the most likely rumor at this time involves a collaboration rather than an acquisition. The normal "people close to discussions" say that talks center on a partnership or joint venture for search-related advertising to compete against Google.
“There of course can be no assurance that any transaction will result from these discussions.”
An alternative rumor, based on the statement in the press release that "Microsoft is considering and has raised with Yahoo! an alternative that would involve a transaction with Yahoo! but not an acquisition of all of Yahoo!", is an acquisition of just Yahoo!'s search business.
The drama never ends. If it's not Icahn proxy fight, it's this.
Prior to Microsoft's bid at the beginning of February, Yahoo! shares traded at $19, and last week the stock closed at $27.66, far above that figure. Meanwhile, shares of Microsoft closed Friday at $29.99.