As reported Yahoo rebuffed Microsoft's offer earlier today. Microsoft issued a statement in response to the Yahoo's rejection of the bid.

Microsoft still wants to pursue the transaction and says that they are offering shareholders superior value and the opportunity to participate in the upside of the combined company.

I agree that Yahoo! shareholder get superior value, if there will be an upside in a combined company is highly questionable.

Microsoft may be better off bribing Webmasters around the globe with the $42 billion to block the googlebot and have their site just be indexed by Microsoft Live.
Via Microsoft site.