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 Street analysts expect the software giant to raise its bid.

Yahoo shares closed on Tuesday at $28.98, more than $2 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 said that it would consider the proposal in the context of its strategic plans. It did not have additional comment on Tuesday.

Jorgensen's speech would have been the first public appearance by a Yahoo executive since Microsoft announced its bid.

Citi said Microsoft wants Yahoo's Internet advertising abilities, and that deal synergies would leave the acquisition reasonably priced even at a higher bid. Moreover, Yahoo has a poison pill provision and stands to do more for Microsoft if the deal is friendly -- many analysts have remarked that winning over Yahoo's rank and file would be key to the deal's success.

(Additional reporting by Eric Auchard in San Francisco and Megan Davies in New York)