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Yahoo-Microsoft face-to-face talks are on

In person talks between Yahoo and Microsoft are under way in the San Francisco Bay Area as the software and search companies consider their alternatives.

Microsoft's discussions with Yahoo "intensified" Friday as the two companies considered possibilities for a last-minute friendly acquisition, The Wall Street Journal reported, citing anonymous sources.

While a deal is far from imminent, the two sides are talking more directly than they have for some time, a source familiar with the situation told CNET The talks, which picked up steam on Friday, are being held in the San Francisco Bay Area, with at least some of the parties on both sides meeting in person, the source said.

And The New York Times had a similar assessment, citing a source who said talks were back on and that Microsoft had increased its offer by "several dollars." Late Friday afternoon, the Journal said that the two companies were "discussing a possible price in the mid-$30s range per share."

The purported talks, if successful, could spare Microsoft the trouble and time of a hostile bid for the search company, if indeed it chooses not to walk away from its three-month-long attempt to acquire Yahoo.

The talks are no guarantee a deal will close, but investors found the evidence convincing. Yahoo's stock rose $1.82, or 7 percent, to $28.63, in late-day trading.

It should be noted that Microsoft's position, as viewed through the "people familiar with the matter" who have The Wall Street Journal on speed dial, has changed dramatically in a short period of time. In the last day, Microsoft has moved from threatening to walk away, to threatening go hostile with the acquisition, to back in "intense" talks.

But posturing is par for the course in any serious negotiation.

If you're buying a car, for example, threatening to walk away and then insisting you won't settle for a higher price can help minimize the amount you end up paying.

Microsoft has various options to consider in its attempt to acquire Yahoo. Hostile ones include making a tender offer directly to shareholders and offering an opposing slate for election to Yahoo's board of directors.

This report was jointly written by staff writer Stephen Shankland.