Microsoft is preparing to launch a two-pronged attack on Yahoo! if the software giant does not make progress with its $44 billion (£22 billion) hostile takeover this weekend.

Steve Ballmer, Microsoft’s chief executive, gave Yahoo! until yesterday to accept the offer, first issued on February 1.

Yahoo! has rejected it as too low.

Last week Chris Liddell, Microsoft’s chief financial officer, said the company had no intention of raising its bid.

“With respect to Yahoo!, we have been clear: speed is of the essence,” Mr Liddell said. “Unless we make progress with the Yahoo board by this weekend, we will explore our alternatives.”

Analysts believe that Microsoft is considering a twin-track attack. It would invite Yahoo! shareholders to exchange their stock for a combination of cash and Microsoft shares. The move — called an “exchange offer” — would put tremendous pressure on Yahoo! if most shareholders accepted.

Microsoft would combine the exchange offer with a campaign to replace the Yahoo! board with its own hand-picked candidates.

The showdown would take place at Yahoo!’s annual meeting, which must take place by July 12.

Although Microsoft’s self-imposed deadline expired yesterday, it might not reveal its next move until later this week.

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