From Bloomberg:

Yahoo! Inc., the world's second most popular Internet search engine, plans to reject Microsoft Corp.'s $44.6 billion unsolicited takeover offer, the Wall Street Journal reported, citing a person familiar with the situation.

The board decided the price "massively undervalues" the Sunnyvale, California-based company, and Yahoo may face risks because regulators could oppose the combination, the newspaper said today. On Feb. 1, Microsoft offered $31 a share in cash and stock for Yahoo, 62 percent more than the price before the bid.

Chief Executive Officer Jerry Yang, who said this week that Yahoo is examining its options, may consider a partnership with bigger rival Google Inc. or ways to wrest a higher offer from Microsoft. Yahoo's failure to crack Google's dominance in search led to eight straight profit declines and cut the stock's value in half in the two years before the offer.

I guess Yahoo wants more money. For the record, I have it rated as a "C - Hold" in PortfolioGrader Pro.