While there are warnings that the talks could "collapse entirely," The New York Times is reporting that Microsoft (MSFT: sentiment, chart, options) has increased its bid for Yahoo! (YHOO: sentiment, chart, options) "by several dollars." The Times cites the infamous "unnamed source." Today's silence from the 2 technology giants had many on Wall Street speculating that a deal was imminent, due to last-minute talks to keep the deal on friendly terms and avoid a potential hostile takeover by MSFT.

Traders put their dollars to work speculating on the pending deal, as YHOO shares vaulted nearly 7% higher in today's trading. The stock closed at $28.67, though, well shy of the potential $32-$33-dollar-per-share price tag. Since MSFT made its initial offering of $31 per share (in stock and cash), YHOO had steadily drifted lower - a sign that if the deal was not accepted the shares could quickly return to their $18-$19-per-share range prior to the offer.