Now what? With Yahoo!'s board of directors universally rejecting Microsoft's mammoth $44.6 billion bid for the company, both Yahoo! and Microsoft await an uncertain future. For Yahoo!, it's pretty clear that no potential partnerships have come close to competing with the Microsoft deal, which should anger shareholders who were hoping to see the past year's losses reversed. Microsoft, meanwhile, could convince Yahoo! shareholders to oust its board and put a friendlier group in charge of the company, but that move would lead to the mass exodus of the Yahoo! engineers that Microsoft needs to badly.

Yesterday, Yahoo! formally rejected Microsoft's takeover bid. Later in the day, Microsoft responded publicly with an icy statement noting that it "reserves the right to pursue all necessary steps to ensure that Yahoo!'s shareholders are provided with the opportunity to realize the value inherent in our proposal."

It's a classic damned-if-you-do, damned-if-you-don't stalemate. As a reasonable middle ground, Microsoft could raise its bid for Yahoo! and hope the Yahoo! board accepts a second offer. But with Yahoo! seemingly convinced that it is worth far more than the $44.6 billion Microsoft has already offered, and Microsoft reiterating its claims that the original bid was both "full and fair," it's not clear that the companies will ever agree.

Further complicating matters for both companies is that their online futures are quite cloudy without each other. Yahoo! has been losing market share for years, and its stock price is in the dumper: As soon as today, the company will lay off 1000 employees, or about 7 percent of its workforce. Microsoft's online unit is the sole part of the company that's not raking in money on a quarterly basis; in fact, it's arguably dragging the rest of the company down. Although critics have compared the merger of Microsoft and Yahoo! as the combination of two losers that still wouldn't compete effectively with market leader Google, it's clear they're better off with each other than they are without.

The question now is, who blinks first? Will Microsoft make Yahoo! an offer it can't refuse? Or will Yahoo! shareholders take matters into their own hands and demand a sale?