Microsoft could raise Yahoo bid, some analysts say

LOS ANGELES (Reuters) - Skeptical investors are trading Yahoo Inc shares at a 6.5 percent discount to Microsoft Corp's unofficial offer price, but some Wall Streeters expect the software giant to raise its bid.

Yahoo shares closed on Tuesday at $28.98, more than $2 per share below the $31 price Microsoft offered last week. Microsoft shares have dropped about 12 percent since that offer was made, potentially cutting the value of the half cash, half stock offer.

"In a hostile deal the acquirer usually does not lead with its best and final offer and we would not be surprised to see Microsoft sweeten the pot somewhat to make the decision easier for Yahoo's board," the investment bank wrote in a note.

"It's reasonable to assume that Microsoft might be willing to increase its offer," analyst Mark Mahaney said in a note.

Yahoo has simply said that it would consider the proposal in the context of its strategic plans.

Finally, Citi and UBS both said that software company Oracle Corp's recent acquisition of BEA Systems, at a 14 percent premium to its initial bid, set a possible precedent of how to get a deal done.