Photo: Frank Eleveld on Flickr. Some rights reserved.

So Jerry Yang's latest lower-case missive to his besieged staff explains that the board rejected Microsoft's offer because it undervalued the firm. It didn't take into account the global audience, recent investment in Panama and in advertising acquisitions and the improved cash flow predicted for 2008.

He went on to talk about mobile and other growth markets in China and Japan - in fact there wasn't much he didn't mention.

"You deserve the credit for the tremendously valuable business we have built," said Yang.

"All of us in management, as well as the members of the board, deeply appreciate and respect what you have done and continue to do in order to maintain and enhance Yahoo's leadership position in the online world."

Translation: please don't leave. As if things weren't uncertain enough, today is supposedly the day when Yahoo starts laying off those 1,000 staff. There's no confirmation on which departments will be worst hit, reports paidContent, but they will be the lowest priority parts of the firm's business.

• Microsoft's response was to call Yahoo's decision unfortunate, but they sounded resolved to battle on: "The Yahoo response does not change our belief in the strategic and financial merits of our proposal.

"As we have said previously, Microsoft reserves the right to pursue all necessary steps to ensure that Yahoo!'s shareholders are provided with the opportunity to realize the value inherent in our proposal."

Translation: we're looking at a proxy battle for shareholders.

• Analysts all share the opinion that the deal will go through, with the most likely scenario that the two sides sit down and hammer out a new price - likely to be around $35 per share. A 'white knight' is unlikely - no-one has come forward yet and few firms have the resources, particularly in the current financial climate, to stump of $44bn for the firm. Source: paidContent

• Assuming the bid for Yahoo goes through eventually, Microsoft is planning to create both a combined giant search portal and a combined advertising platform across the two companies, says Kara Swisher. Source: AllThingsD

• One source who says that Yahoo will sell at $36 per share - above the $31 Microsoft offer but below the $40 goal that had been reported. Negotiation tactics, anyone? Source: Valleywag

• Investors are starting to stack up against Yang, reports the New York Post, saying that Microsoft chief executive Steve Ballmer has hired the specialist proxy solicitation firm InnisFree. Source: New York Post

• More spies have reported that Yang has hundreds of employees working on secret revamp plans which include overhauling the homepage, consolidating the various social networks (which could include Flickr, Delicious and Upcoming.org), introducing a Facebook-style develop platform for the whole Yahoo network and reviewing Yahoo's network infrastructure. Yang had planned to launch those this month, so Microsoft's bid was bad timing for him. Source: Valleywag