Businesswire reports that Yahoo (NASDAQ: YHOO) and Microsoft Corp. (NASDAQ: MSFT) have officially ended their discussions about any kind of partnership. Yahoo stock is down 11%.

According to Yahoo: "Microsoft is not interested in pursuing an acquisition of all of Yahoo!, even at the price range it had previously suggested. With respect to an acquisition of Yahoo!'s search business alone that Microsoft had proposed, Yahoo!'s Board of Directors rejected it for three reasons:

• Such a transaction would not be consistent with the company's view of the converging search and display marketplaces,
• Would leave the company without an independent search business that it views as critical to its strategic future, and
• Would not be in the best interests of Yahoo! stockholders.

Expect more loud squawking noises from Carl Icahn to follow. Cover your ears!

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.

Yahoo! Inc. (NASDAQ: YHOO) co-founders Jerry Yang, also the company's chief executive, and David Filo, the less visible of the two, should take Microsoft Corp.'s (NASDAQ: MSFT) $44.6 billion offer before the world's largest software company realizes how much it is overpaying for the company.

Better yet, Yang and Filo should "reject" Microsoft's initial offer because -- at least according to CNBC -- Microsoft may be willing to up its bid. That seems to be the market's expectation given that shares of Sunnyvale, Calif.-based Yahoo haven't hit the $31 offer level.

The Yahoo twosome need to get while the getting is good. As The Wall Street Journal notes, "If the deal goes through as presently constituted, Mr. Filo's stake would be worth more than $2.4 billion - not counting his options and other shares..Mr. Yang's stake would be worth more than $1.64 billion - again, not counting options and so forth."

During the height of the Internet bubble, both were worth more than $6 billion, the paper said.

The forays of Yahoo and Microsoft's MSN into original content already spooks content companies, so I bet if the deal through it will lead to a rash of mergers between old and new media companies. A combined company would likely do more original fare to attract advertisers and users.

This raises the question of whether Google Inc. (NASDAQ: GOOG) will start developing its own content given the likely merger and its recent disappointing results. Thoughts?