AP sources give inside look at Microsoft's raised Yahoo bid

The answer is taking on greater importance as more outraged Yahoo shareholders threaten to sue the company's board -or try replacing the 10 directors -for the way they responded to Microsoft's sweetened offer.

With shareholders up in arms, Sunnyvale-based Yahoo has been trying to raise doubts about the legitimacy of Microsoft's last bid of $33 a share by pointing out that it wasn't submitted in writing.

There is even a theory circulating that Microsoft Chief Executive Steve Ballmer dangled the new offer before his Yahoo counterpart, Jerry Yang, fully knowing that it would be spurned and open a window for him to flee a deal that was starting to look like a potential albatross.

The Associated Press contacted people familiar with the deal to piece together how the final days of negotiations unfolded. These people asked not to be identified because the talks were confidential.

While they differed on some details, the people agreed Redmond, Wash.-based Microsoft didn't spell out the $47.5 billion offer in writing. Instead, it was orally presented by both Ballmer and Brad Smith, the software maker's general counsel.

In contrast, Microsoft's initial bid of $44.6 billion, or $31 per share, was sent to Yahoo's board in a Jan. 31 letter that contained specific financing terms.

Although raising a takeover bid orally isn't ideal, it's acceptable when two sides like Microsoft and Yahoo already have been engaged a lengthy dialogue, said Morton Pierce, a New York lawyer specializing in corporate acquisitions.

"You would always prefer to have (an offer) in writing to see if there are any conditions attached, but it's not necessary when people have been negotiating in good faith," Pierce said.

Microsoft and Yahoo executives had already held several rounds of meetings by the time Ballmer came to California April 30 to meet with Yahoo CEO Jerry Yang in hopes of settling on a mutually acceptable sale price.