I am not surprised because there is no reason to not think that Yahoo will still explore every option before the upcoming Annual Shareholders meeting. TechCrunch reports that the talks are back on but no clear details are forthcoming. So, what can we expect?
I do not see a full-fledged merger unless Microsoft can get Yahoo close to current price [without paying a premium anywhere close to what it offered in 2007 or even a few weeks back]. If Ballmer gets Yahoo at around $21, he will declare that it is a win for MSFT shareholders and reiterate that Yahoo fits in with Microsoft's long-term vision because it can help Microsoft achieve the requite scale quickly (and underplay any post-merger integration problems). I doubt that Microsoft will get such a bargain because that price is even lower than what Carl Icahn paid to accumulate his near 5% stake. He may not be willing to sell his stake for such a short-term loss unless he is prepared to accept MSFT shares under the belief that they are under-valued and may go back up at a faster rate!
If the discussions are about selling or combining on-line advertising business to create a separate entity with some sort of notional value, then Yang may be able to go in front of his shareholders and claim that he has salvaged a bad situation but without selling away the crown-jewels.
This story is far from over. Microsoft said: 'No Comment." For Yahoo, I believe that every option is on the table till Aug 1.