Yahoo's board of directors plans to reject Microsoft's unsolicited $44.6 billion takeover bid, The Wall Street Journal reported Saturday, citing as its source "a person familiar with the situation."

According to the report, the source said the Yahoo board has determined that the $31-per-share offer "massively undervalues" the online services company. In addition, Microsoft's buyout bid doesn't take into consideration the business risks that Yahoo would be taking if it entered into an agreement that in the end might not be approved by government regulators, the source told the Journal.

According to the Journal, Yahoo's board intends to send Microsoft a letter on Monday, detailing its position.

A Yahoo spokeswoman declined to comment on the report today. "We are not providing details on the board's review process," she wrote. "Yahoo's board is carefully and thoroughly evaluating the Microsoft proposal in the context of all of the company's strategic alternatives, and will pursue the best course of action to maximize long-term value for shareholders."

Microsoft, which announced its offer for Yahoo on Feb. 1, couldn't be reached for comment today. The offer is a combined cash-and-stock deal; in announcing the bid, Microsoft said Yahoo shareholders could choose to receive either cash or Microsoft stock, although it added that the total consideration would be equally split between the two forms of payment.

Yesterday, published reports said that Yahoo's board was meeting to discuss the offer.

Yahoo is still evaluating other options, including a search advertising partnership with Google, according to today's report by the Journal. It also may still be open to a longer negotiation with Microsoft: The Journal said it was told by the source that Yahoo would be unlikely to consider any offers below $40 per share.

If so, that would require Microsoft to raise its original offer by at least 29 percent, or about $13 billion. In other words, the cost for Microsoft to become a more credible rival to Google in the search and online advertising markets could start at about $57.6 billion.

Google has been doing what it can to scuttle the Microsoft takeover bid, including playing the antitrust card by asking, in a blog post by one of its executives last Monday, whether Microsoft might "attempt to exert the same sort of inappropriate and illegal influence over the Internet that it did with the PC?"

Microsoft quickly shot back, issuing a statement saying that a combination of it and Yahoo merger would "create a more competitive marketplace."

(Eric Lai contributed to this story.)

Computerworld is an InfoWorld affiliate.