Microsoft Corp's deadline to Yahoo to accept its $40 billion-plus offer passed without a word, setting the stage for the next act in the corporate drama.

In an open letter to the Yahoo board of directors on April 5, Microsoft CEO Steve Ballmer gave the Internet giant three weeks to accept the $31 dollar per share bid – an offer which expired on Saturday – or face a hostile takeover.

He also warned that Microsoft could drop its bid price. The ultimatum followed Yahoo's repeated rejection of Microsoft's February 1 bid, saying it is too low and one that undervalues the company.

Analysts are divided about what Microsoft's next move would be, with some expecting Microsoft to go direct to Yahoo shareholders to oust its board, while others believe that Microsoft could simply walk away from the deal.

In fact, Microsoft CFO Chris Liddell made clear this week that the company was prepared to drop the bid. He told company employees on Friday "We put what anyone reasonable would say was an incredibly generous offer on the table to try to facilitate a speedy transaction. We've been disappointed in the speed at which the transaction went."

He said Microsoft had publicly signaled what its alternatives were if the two companies failed to reach a deal by the weekend. "And our alternatives then, are to try to facilitate a transition, to possibly go directly to Yahoo shareholders. Or, to walk away and go back to our original organic strategy. We'll see what next week brings," he added.

There is no doubt that Microsoft could live without Yahoo, but acquiring Yahoo would put it in a much better position to compete against Google in the Internet search and advertising arena.