After three months of public posturing and selective leaks, a break in the standoff over Microsoft's offer for Yahoo may be near.

The New York Times’ DealBook and the Wall Street Journal’s web site says that Microsoft and Yahoo have stepped up talks in an effort to reach a friendly deal.

DealBook reports that Microsoft has increased its $31-per-share, stock and cash offer “by several dollars,” but cautions that the talks could still collapse. The terms under discussion could not be learned.

Shares of Yahoo, which had been higher most of the day, spiked up 11 percent following the reports. 

Microsoft's chief executive, Steve Ballmer, told a town-hall meeting of Microsoft employees on Thursday that an announcement of what the company planned to do about Yahoo could come shortly. Microsoft, he said, according to several reports, was weighing three basic options: walking away, launching a hostile takeover, or sweetening the price to win a deal.

Matthew Karnitschnig, Kevin Delaney, and Robert Guth of the Wall Street Journal reported earlier oday that Microsoft is "leaning toward going hostile" with an announcement expected today. But the unidentified sources cited by the Journal also cautioned that the situation was fluid and could change.

The risk of going hostile is that it could prompt a flight of talent from Yahoo and would make any integration more difficult, turning Microsoft's prize into damaged goods.  

Walking away would again raise questions about Microsoft's strategy for the internet, although many Microsoft employees apparently feel a Yahoo acquisition would be the wrong way to try to take on Google.

And paying more for Yahoo? Microsoft could easily afford to increase the bid to $35 per share, but Ballmer may not want to feel that he has been outmaneuvered by Yahoo's C.E.O., Jerry Yang.

"I know exactly what I think Yahoo is worth to me—exactly,'' Ballmer said in a meeting with employees, Bloomberg News reports. "I won't go a dime above, and I will go to what I think it's worth if that gets the deal done.''

The Journal says that Microsoft has indicated that it is willing to raise its offer to $33 per share, but that major Yahoo shareholders are looking for $35 to $37 per share.

Henry Blodget on Silicon Alley Insider sees some significance in the absence in the Journal article of any suggestion from its unnamed Microsoft sources that talk of a $35 to $37 price should be dismissed out of hand.

"Jerry's playing this brilliantly," Blodget says of Yang. "But if he turns up his nose at $35, and then Steve rages off and pulls the bid, Yahoo shareholders are going to storm the Sunnyvale campus with torches and pitchforks."