Yahoo rejected the unsolicited $44.6 billion takeover offer from Microsoft on Monday, saying the bid undervalued the company, putting pressure on the world's largest software company to sweeten the bid.

After a 10 day review, Yahoo's board said that stated the $31 per share bid was too low to be in the best interests of shareholders.

After careful evaluation, the board believes that Microsoft's proposal substantially undervalues Yahoo, Yahoo said.

In the three-paragraph statement, Yahoo said its ad technology, future prospects and investment portfolio mean the company is worth more. The decision was unanimous and the board is continually evaluating'' options to boost the stock's value, Yahoo said.

The Wall Street Journal suggested that the Internet pioneer may be holding out for an offer as high as $40 per share which some analysts believe the company could be worth.

Sanford C. Bernstein analyst & Co. Jeffrey Lindsay said selling the the Web search business to Google may add $7 a share, job cuts could produce another $6, and buying part of Time Warner Inc.'s AOL would generate $1 to $5.

The challenge for Yahoo's management team is to come up with a convincing enough story that shareholders will accept it in preference to Microsoft's cash and equity offer, he said.

The rejection leaves Microsoft weighing whether to raise the price, give up, or take the offer straight to shareholders.

Microsoft called Yahoo Inc.'s rejection of its unsolicited $44.6 billion bid to buy the struggling search engine operator unfortunate late Monday but signaled it would continue its efforts to acquire the company.

It is unfortunate that Yahoo! has not embraced our full and fair proposal to combine our companies, Microsoft said in a statement.

Shares of Yahoo rose 67 cents, or 2.29 percent to $29.87 to close Monday, rising another 15 cents shortly after the bell.