The chief executive officer of Microsoft Corp., Steve Ballmer, may start a fight to oust Yahoo! Inc.’s board and pave the way for a takeover, after the Internet company let his deadline pass without agreeing to a deal.

Mr. Ballmer gave Yahoo an ultimatum to accept a $44.6 billion bid by Saturday. To crack Google Inc.’s dominance of the Internet advertising market, Microsoft is looking to handle more Web searches, sell advertisements with more graphics and videos, and be able to target campaigns and track their success.

Microsoft, the world’s biggest software maker, can’t afford to let Yahoo go, an analyst for ICAP Securities in Jersey City, N.J., Sachin Shah, said. The company has spent billions creating a Web search engine and technology to sell ads, and buying Internet companies such as AQuantive Inc. Acquiring Yahoo would give it the No. 2 spot in the $41 billion online ad market.

“Microsoft does need Yahoo,” Mr. Shah said, a merger-arbitrage analyst, in an interview with Bloomberg Television this week. “If they didn’t, they would have walked away a long time ago.”

Losses at Redmond, Wash.-based Microsoft’s Internet business widened to $228 million last quarter, and sales rose to $843 million, at the low end of company forecasts. Google, owner of the most used Internet search engine, had $3.7 billion in revenue in the period, excluding sales passed on to partner sites.

Advertising linked to search results accounts for more than half of Internet ad sales. Google handled six times more queries in America in March than Microsoft, according to ComScore Inc., a Reston, Va.-based researcher.