Internet search engine Yahoo! yesterday rebuffed a $44.6 billion (£22.9 billion) takeover approach from software giant Microsoft.
The online group said the offer - made in a surprise move less than two weeks ago - "substantially undervalues" the business.
The rejection comes after mounting speculation at the weekend that Yahoo! was set to snub Microsoft's bid.
It is believed Yahoo! is holding out for at least $56 billion (£28.8 billion).
A merger between the two would create one of the world's biggest technology firms and a rival to search engine Google.
But Yahoo! is understood to be planning a raft of defensive moves to fend off Microsoft's advances.
It is reportedly looking at rekindling merger talks with AOL and is also rumoured to be mooting the idea of an advertising partnership with Google.
Microsoft has already hinted that it is prepared to make the bid hostile, saying it reserved the right "to pursue all necessary steps" to win over the firm's shareholders if the deal is opposed.
The group could decide to take its offer straight to Yahoo! shareholders, although market experts suggested that it may yet seek to sweeten its bid.
It is thought to be prepared to up its offer to 35 US dollars (£18) a share.
Microsoft made its original 31 US dollars (£16) a share in a bid to challenge the dominance of internet search engine giant Google.
Its unexpected approach comes a year after Microsoft and Yahoo! held talks over a possible tie-up to challenge Google.
Microsoft had warned on unveiling its offer that the "competitive situation has not improved" and believes a merger is the "only alternative" to challenging Google's dominance.