The New York Times reports that the board of Yahoo! Inc. (NASDAQ: YHOO) has rejected Microsoft Corp.'s (NASDAQ: MSFT) $44.6 billion takeover bid. Does Yahoo have a bigger bid in the wings? No, of course not. It's trying to use a shaky legal argument -- that the deal -- which was nearly double Yahoo!'s pre-deal value -- severely undervalues Yahoo!

If Yahoo! has so many wonderful ways to increase its shareholder value, why are they not reflected in its stock price? Meanwhile, the best short-term money making idea would be to boost Yahoo!'s revenue and profit by outsourcing its search-related ad business to Google Inc. (NASDAQ: GOOG), because Google's advertising technology generates far more cash for every search query, on average.

But Yahoo! has resisted this move because it invested in Panama, which was intended to compete with Google. For Yahoo! executives, replacing Panama, or other parts of its search system, with Google's technology would be an admission of defeat.

If this is the best that Yahoo! can do to respond to Microsoft's bid, I think shareholders better hope that Microsoft doesn't decide to just walk away. If it thinks that this head fake will get Microsoft to raise its bid, then maybe it makes sense.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned.