In another sign it has "moved on" from Yahoo (at least for now), Microsoft has released members of its potential proxy board slate from their obligations, The Wall Street Journal reports.

The action follows a string of comments from Microsoft executives indicating Saturday's decision to walk away wasn't a negotiating tactic, including these Thursday from Microsoft's Chief Research and Strategy Officer Craig Mundie: "The market may wish that the Yahoo deal may come back together, but Microsoft at least at this point assumes it's over," Reuters reports.

Mundie did leave the door open a crack, adding: "Yahoo could always come back again and say please buy us for $33 (a share) and I'm sure we might reconsider it but we're not assuming that's going to happen."

Despite speculation big shareholders like Capital Research & Management and/or Legg Mason would push Yahoo to go back to the negotiating table, Wall Street is also moving on.

After suspending coverage during the negotiations -- to avoid conflicts of interest -- Yahoo M&A advisors Goldman Sachs and Lehman Brothers have reinstated coverage on Tech Ticker's parent, Dealbook reports.

Then again, Yahoo shares were up another 2.3% to $26.22 Thursday, meaning optimistic traders either smell another deal or are whistling past the graveyard.

When the credit crunch put an end to the private equity buyout binge, the bulls pinned their hopes on more deals by strategic buyers.

But the M&A boom appears to be heading in reverse, which is a big reason to "sell in May and go away," according to Todd Harrison, founder and CEO of Minyanville.com.

The (apparent) failure of the Microsoft-Yahoo deal has captured the media's attention, but traders like Harrison are really focused on the Bank of America-Countrywide merger.

Bank of America triggered a storm of speculation last week when it said it might not absorb all of Countrywide's debt. Standard & Poor's quickly followed by downgrading Countrywide's debt to junk analysts; on Monday, sell-side analysts began to speculate that Bank of America would either renegotiate or abandon its bid, sending Countrywide tumbling below the $7-per-share offer price.

Publicly, Bank of America says the deal is still on. But Harrison wonders if the company isn't privately lobbying for the same kind of federal backstop JPMorgan got when it took over Bear Stearns in March.

The press is abuzz with speculation that Microsoft may be making a bid for Facebook, a deal Henry Blodget loves. And it's easy to see why Microsoft would, too. But my money says Facebook still doesn't sell.

The wild card for future negotiations will be Facebook's board. Right now, the board consists of just Facebook CEO Mark Zuckerberg and investors Peter Thiel and Jim Breyer, and Zuckerberg controls three seats. The fourth member could have a pivotal vote in any future acquisitions. And if you're a Facebook bull, rumors that Marc Andreessen may be joining the board are good news.

Despite Microsoft's "we've moved on" declarations and reports Google might be less enthusiastic about an ad search deal, Yahoo "trades like there's something else in the works," says Todd Harrison, founder and CEO of Minyanville.com.

Like many, Harrison was surprised Yahoo didn't fall further Monday and more surprised the stock has continued to rally, trading well above $26 per share intraday Thursday.

A former trader at Cramer Berkowitz, Morgan Stanley, and Galleon Group, Harrison says Yahoo's strength this week is an indicator of traders' betting on the deal being resuscitated. As for Microsoft, even if the software giant really is no longer interested in Yahoo, the stock's lackluster performance could be a sign the software giant is going to seek other ways to spend $45 billion. There's rumblings about a Microsoft bid for Facebook, but don't discount the potential for a big share buyback, which will give the ailing stock a boost, Harrison says.

From All Things Digital, May 7, 2008:

Project Granola?

Apparently, that’s the jokey nickname that’s been given by some in the company to Microsoft’s (MSFT) new online strategy, in the wake of its failed efforts to acquire Yahoo (YHOO) that ended in a big heap of mess this past weekend.

Now, sources tell BoomTown, it is all about “organic” -- hence the image of a healthy handful of granola (except for the fact that, in my experience, nobody really likes granola after eating it as much as they think will before).

In any case, it is a word Microsoft folks have been slipping into the conversations with BoomTown over the past few days, so much so that I have started to feel like I was talking to execs from Whole Foods.

Now Microsoft’s greenness has gone public.

Updated from 10:47 a.m. EDT

With rumors Jerry Yang is being "benched" and Roy Bostock will now head Yahoo's effort to get Microsoft back to the negotiating table, a few things are clear:

• Bostock, Yahoo's chairman, should have been leading the effort from the get-go, and should have been at the infamous Seattle Airport meeting where the deal broke down.
• If "we're walking away" was a negotiating ploy by Microsoft, it has worked like a charm.

The problem for those buying Yahoo stock on hopes for a revival of negotiations (or a big Google outsourcing pact) is that walking away doesn't appear to be a negotiating tactic.

From Steve Ballmer's "clearly a deal is not meant to be" comment Saturday to Bill Gates' comments Monday on Fox Business News, the message from Microsoft is clear: "We've moved on," as Windows Live GM Brian Hall put it on Tuesday.

Update: In Tokyo Wednesday, Gates added: "Now at this point Microsoft is focused on its independent strategy."

Taking that message at face value, there really appears to be only one way for Yang, Bostock, and their M&A advisors to get Microsoft back to the negotiating table: Deliver Yahoo to Ballmer on a silver platter, with assurance of talent retention, regulatory assurances, and a deal price tied to performance targets.

In other words, Yahoo needs to do a 180-degree turn from its prior negotiating tactic of "any deal but Microsoft."

Barring that, expect some major fireworks at Yahoo's July 3 shareholder meeting.

With Yahoo under pressure from major shareholders and senior management backpedaling, maybe a deal with Microsoft isn't dead after all.

At least, that's how many traders are seeing things: Yahoo shares closed well off their session lows Monday and are rallying Tuesday, while Microsoft stock struggles to get above $30.

But those betting Microsoft will come back to the table soon are assuming Steve Ballmer's "bye-bye" letter Saturday was a negotiating tactic vs. a true change of heart.

Yahoo's PR team is trying to paint Ballmer as having "suddenly" changed his mind about the Yahoo bid. But as Henry Blodget writes, the truth is his position evolved over the three months when Yahoo seemed to indicate it would prefer any alternative to a deal and Microsoft's own employees and shareholders expressed major reservations.

Meanwhile, one of Yahoo's best "alternatives" was the outsourcing deal with Google, which Citigroup's Mark Mahaney estimates could generate as much as $1 billion of additional cash flow to Yahoo annually.

Mahaney's $1 billion target has been widely quoted but Sue Decker says Yahoo isn't giving up on search or display, suggesting a more limited outsourcing agreement -- and, therefore, considerably less than a $1 billion bump for Tech Ticker's parent.

In other words, Yahoo bulls may be in for a rude awakening on two fronts.

From Silicon Alley Insider, May 6, 2008:

How do we know that Steve Ballmer's withdrawal of his Yahoo (YHOO) offer wasn't just a brilliant negotiating move? Because less than 72 hours after he did it -- with the target, Yahoo, collapsing in a spectacular riot of backpedaling and finger-pointing -- Ballmer's advisors have already rushed to the New York Times to scream about what an idiot he is.

"Amateur hour," is how one Ballmer aide described his handling of this deal, in the midst of a spirited Andrew Ross Sorkin defense of Microsoft (MSFT) and Yahoo's Wall Street M&A advisors. Sorkin believes that the blame for the Yahoo disaster lies squarely on Steve Ballmer and Jerry Yang's shoulders -- not, as some have suggested, with the team of Wall Street's best and brightest who steered the pair off the cliff.

Faced with a fierce and public rebuke from its top institutional shareholders, Yahoo's leadership has done some major backpedaling in the past 24 hours.

"They chose to walk away after we put a price on the table, and they didn't want to negotiate," Yahoo co-founder and CEO Jerry Yang told The New York Times.

To Reuters, Yang said: "If they have anything new to say, we would be open...I am more than willing to listen."

Meanwhile, Yahoo chairman Roy Bostock told The Wall Street Journal that $37 "was not a take-it-or-leave it statement."

These statements, as well as Yahoo's contention -- repeated by Sue Decker in her Tech Ticker interview -- that Microsoft never made a $33 bid seems to be a coordinated effort to both get Microsoft back to the table and appease irate shareholders.

On the latter front, Yang, Bostock and Yahoo's board came under blistering attack from the firm's largest shareholder: Gordon Crawford of Capital Research Global Investors, whose parent firm owns 16% of Tech Ticker's parent.

"I am extremely angry at Jerry Yang and at the so-called independent board," Crawford told The New York Times.

In his Saturday missive, Microsoft CEO Steve Ballmer cited Yahoo's proposed partnership with Google as a key reason for not going hostile. Ballmer said such an arrangement "would fundamentally undermine Yahoo's own strategy and long-term viability by encouraging advertisers to use Google as opposed to your Panama paid search system."

Yahoo President Sue Decker disputed that assertion in the second part of my interview with her Monday. Decker says the Yahoo-Google search test was "helpful" but that Yahoo will remain a "principal" in both search and display. (For part one of the interview, click here.) She didn't rule out a possible deal with AOL or a stand-alone strategy.

Decker acknowledged the anger and disappointment among some Yahoo employees who wanted the Microsoft deal. But, she added, there's a "greater sense of urgency" now at Yahoo, and "I think you'll find as many excited to show the world what they can do."