Microsoft CEO Steve Ballmer issued a letter to Yahoo CEO Jerry Yang over the weekend stating that the company withdrawing its offer to Yahoo. Microsoft had raised its bid to well over the $33 per share, upping it by nearly $5 billion which was still not enough to sway Yahoo board members.

“Despite our best efforts, including raising our bid by roughly $5 billion, Yahoo! has not moved toward accepting our offer. After careful consideration, we believe the economics demanded by Yahoo! do not make sense for us, and it is in the best interests of Microsoft stockholders, employees and other stakeholders to withdraw our proposal,” said Ballmer in the letter.

Flickr announced on Tuesday that it is has added video sharing to its popular photo-sharing online community. The new video sharing feature allows any pro members of the Flickr community to upload and share video clips with others using the same scope restrictions currently available for photo sharing.

The video clips can be taken with just about any device and can be up to 90 seconds in length or have a maximum size of 150MB. Even though only pro members can upload the video, all visitors will be able to view them depending on the share level given to the video. Flicker currently has about 42 million monthly visitors to the popular photo sharing site and hosts around 2 billion photos from around the world. Adding video content is a logical next step in further growing the sites popularity and may entice many people to upload videos with some sharing restrictions which might not have done with sites like YouTube where they are almost instantly public. The site will also have the ability to tag and geotag the videos and the ability to upload straight from a camera phone.

Yahoo CEO Jerry Yang on Monday shot back a letter in response to Microsoft CEO Steve Ballmer’s 3-week ultimatum for Yahoo to come to negotiations with a firm message that Yahoo has not changed their tune in regards to Microsoft taking over the search engine. Ballmer’s letter had spelled out plans for a proxy contest to unseat the exist Yahoo board of directors and that continued delays could reduce the $44.6 billion offer which would mean less for shareholders.

“Our board’s view of your proposal has not changed,” said Yang along with Chairman Roy Bostock. “We continue to believe that your proposal is not in the best interests of Yahoo and our shareholders.”

Instead of going through the negotiations Yahoo has chosen to beat their exclamation points into swords and fight back against Microsoft. Yang continued in the letter stating that the offer and proxy contest would not be in the best interest of Yahoo and certainly not part of a friendly transaction as Microsoft first proposed.

Microsoft issued another letter to the Yahoo board of directors on Saturday with a deadline of 3 weeks for the company to accept the previous $44.6 billion takeover offer that Microsoft proposed in the beginning of February. Despite some recent talks between the two companies, an agreement has not been made and Microsoft is starting to lean heavy on the search engine firm’s board by threatening to go straight to the shareholders if necessary.

“If we have not concluded an agreement within the next three weeks, we will be compelled to take our case directly to your shareholders, including the initiation of a proxy contest to elect an alternative slate of directors for the Yahoo! board,” the letter read. “The substantial premium reflected in our initial proposal anticipated a friendly transaction with you. If we are forced to take an offer directly to your shareholders, that action will have an undesirable impact on the value of your company from our perspective which will be reflected in the terms of our proposal.”, stated Steve Ballmer’s letter to Yahoo.

Yahoo is bringing to the mobile space a product it feels will make it more convenient to manage your social communications in one place. This product is called Yahoo oneConnect and the company expects it will be available in the second quarter of the year.

Yahoo oneConnect is built around an open architecture which brings together email, instant messaging (IM), text messaging (SMS), and social networks into one central, mobile location. A centrally managed “socially-connected” address book will let one view status updates, photo uploads and the recent activity of contacts across various social networks. This same open design will let one talk across a range of popular online services.

And the show down continues…Yahoo rejects Microsoft’s take over bid, Microsoft looks like it will go forward with it anyhow:

“It is unfortunate that Yahoo! has not embraced our full and fair proposal to combine our companies. Based on conversations with stakeholders of both companies, we are confident that moving forward promptly to consummate a transaction is in the best interests of all parties.

We are offering shareholders superior value and the opportunity to participate in the upside of the combined company. The combination also offers an increasingly exciting set of solutions for consumers, publishers and advertisers while becoming better positioned to compete in the online services market.

You can be pretty certain we haven’t heard the last from Microsoft regarding their offer to buy Yahoo!, but for now Yahoo! is saying a “no thanks” to the $44.6 billion buyout offer. Jerry Yang and other directors say Yahoo! are seeking at least $40 a share, or nearly $60 billion. Microsoft may not be willing to pay.

The bean counters of Yahoo! feel the number is on the low end. Others would like to get cozy with Google in order to improve search revenues, despite the fact that there may be some antitrust implications with that. Stayed tuned on this one. Things are getting very interesting.

Yahoo last night quietly kicked off a new competitor to YouTube which lets anyone “create their own live video experience.” It is called Y! Live and you can access it for free.

Y! Live is targeted towards people who want to do live video broadcasting. Through it Yahoo sees people, for example, broadcasting live musical performances and interacting with fans with video and chat. The broadcast can be embedded, so viewers don’t have to go to the Y! Live site to view it.

With the buzz of the possible Microsoft takeover of Yahoo still fresh in the air, Google wasted no time in jumping in to say the deal could possibly create a monopoly which threatens “the underlying principles of the Internet: openness and innovation.” This, from Google’s chief legal counsel, prompted a quick response back from Microsoft’s chief legal counsel saying the merger will “create a more competitive marketplace by establishing a compelling number two competitor for Internet search and online advertising.”

Google’s David Drummond, Senior Vice President, Corporate Development and Chief Legal Officer, had this to say on Sunday – “The openness of the Internet is what made Google — and Yahoo! — possible. A good idea that users find useful spreads quickly. Businesses can be created around the idea. Users benefit from constant innovation. It’s what makes the Internet such an exciting place.

Microsoft announced this morning that it has official made an acquisition offer to Yahoo for the sum of $44.6 billion. Steve Ballmer on behalf of the Microsoft board of directors sent out a letter to Yahoo yesterday with the offer at $31 per share for all of Yahoo’s outstanding common stock.

According to the letter Microsoft has been in talks with Yahoo for some time, citing a letter in February of 2007 from Yahoo stating that “now is not the right time…”. Microsoft points out that things have not improved for Yahoo since earlier last year and without naming any other companies they refer to an increasingly dominate player in the market (we’re just guessing Google) who is increasing its own dominance by more acquisitions. Microsoft feels that combining forces with Yahoo increases the fighting chances in the online advertising space for both of them.