Last week I wrote a rather breathless account of how exciting the weekend was going to be. Microsoft was going to initiate extreme hostilities against Yahoo! in its bid to take over the elder search portal. Microsoft CEO Steve Ballmer had imposed a 21-day deadline that expired last Saturday and the world expected immediate and brutally forceful action. Nothing happened. When Sunday morning rolled around I felt somewhat burned…

Given the lack of events last weekend, it’s hard to get all excited about the latest round of news, rumours and innuendo but I get paid to get excited about this sort of thing so here goes…

He’s gonna or he’s not. It’s come down to a the simplest of complex choices for Microsoft CEO Steve Ballmer. An emergency Microsoft Board of Directors meeting held yesterday gave Ballmer the absolute power to make a decision to move forward into hostile territory or retreat to the relative discomfort of his Redmond Washington office. The decision is expected to be announced this weekend, possibly as soon as this afternoon.

To further complicate Ballmer’s already complicated day, a Town Hall meeting has been called at Microsoft today where lay-offs are expected to hit some of the 75,000+ on-campus employees. Who gets hit and which departments are re-organized might offer important clues to Microsoft’s long-term planning.

Ballmer yesterday stated that Microsoft can go it alone and build its own online advertising platform. Unfortunately, that statement appears more bluster than brag as Microsoft has repeatedly tried to build an effective online advertising system to compete with its far larger rivals AdWords and Yahoo! Search Marketing. Though Microsoft owns the display advertising firm aQuantive, it is not seen as a serious challenger to Yahoo!’s Right Media or Google’s DoubleClick.

To further complicate matters, Yahoo! and Google have been making beautiful music together recently in the form of an advertising distribution deal between the two mega-firms. It actually looks as if Yahoo! could probably survive on its own. Perhaps it just took the push of a very real threat to shake Sunnyvale into action.

Everything is so fluid right now there is really no way to possibly predict the eventual outcome.

One thing is certain though. Microsoft and Yahoo! have both been damaged over the past four months. Though it might not look weakened on the surface, Microsoft will take an enormous hit if the Yahoo! deal does not get done. If Ballmer can’t pull this acquisition off, his tenure as CEO at the world’s largest software maker might come to an ignoble end. Microsoft has ended up with the short end of the stick far too many times when it comes to exploiting the potential of the Internet for fun, profit and long-term development. It’s Vista operating system has given commentators like myself five years of poking fun at Microsoft for not getting it together, while giving early adopters headaches and heartburn. In short, what should have been a major triumph has turned into a public embarrassment. Ballmer wears Microsoft’s public failures on his sleeve.

Even if Ballmer does end up pulling Yahoo! into Microsoft, he will face the herculean challenge of merging two uniquely different corporate cultures into one. Birkenstocks do not go nearly as well with pinstripes as one might suppose.

Today, an awful lot of money and prestige is on the line. Steve Ballmer is going to go hostile or he goes home. Time is of the essence and with Yahoo!’s Annual General Meeting sneaking up quickly, time is getting very tight indeed. Expect action…