In the absence of any fresh news, it’s always fun to speculate. Shares of Yahoo (NSDQ: YHOO) are getting a boost today after Citi analyst Mark Mahaney said an increased $34 bid from Microsoft (NSDQ: MSFT) was the most likely outcome to this drama. The view isn’t based on any specific knowledge of the situation, nor is it valuation-based. As he explained in a CNBC interview, it’s just a risk-reward kind of play: Microsoft is committed to this deal, so $31 should be a magnet for the company’s share price. If Microsoft wants to get the deal done expeditiously, it will raise its bid by a few bucks, giving investors who buy in now more than a 20 percent pop. Yahoo shares are currently up about 2.5 percent on what is a down day overall for the markets. Some key points from his report:

—Microsoft unlikely to walk: “Despite 3-4 years of making online advertising a key strategic priority, MSFT has yet to demonstrate traction – its share of U.S. Online Advertising was flat to slightly down in ’07 (7.5% vs. 7.6% in ’06); 2) Google’s share of U.S. Online Advertising has significantly increased (35% in ’06 to 40% in 07) & the DoubleClick acquisition could materially ramp its display ad biz; and 3) No other step could potentially address the scale/liquidity challenge of MSFT’s ad platform.”

—Strategic alternatives: “While we continue to see no other competing bidders, we believe YHOO is aggressively pursuing strategic alternatives. One possibility is a tie-up with Time Warner (NYSE: TWX), whereby TWX would contribute its Online Content assets to YHOO in exchange for a stake. We believe this could serve as a forcing function to a higher MSFT bid.”