Microsoft Threatens Lower Bid

Microsoft set a firm deadline for Yahoo to accept its $41 billion offer in a letter to Yahoo's board this past weekend. Microsoft warned that if its offer was not accepted by April 26, it would launch a hostile bid at a lower price, according to a report by the Associated Press.

Yahoo formally declined Microsoft's offer in February and has been in talks with Google, MySpace.com, and AOL but no offers have materialized.

"If we are forced to take an offer directly to your shareholders, that action will have an undesirable impact on the value of your company," Steve Ballmer, CEO, Microsoft.

In a letter to Yahoo's board, Microsoft CEO Steve Ballmer warned that it would take the fight directly to Yahoo shareholders if an agreement could not be reached. "If we have not concluded an agreement within the next three weeks, we will be compelled to take our case directly to your shareholders, including the initiation of a proxy contest to elect an alternative slate of directors for the Yahoo board," wrote Ballmer.

He also indicated that a hostile bid would likely be offered at a lower price, putting pressure on the Yahoo board to accept the current deal. "If we are forced to take an offer directly to your shareholders, that action will have an undesirable impact on the value of your company from our perspective which will be reflected in the terms of our proposal," he wrote.

Microsoft has also threatened that it could look for ways to elect its own candidates for board seats on Yahoo at the company's next shareholder meeting. Yahoo has not yet set a date for its annual meeting. According to the AP report, Microsoft has hired a proxy solicitation firm to help it with a potential hostile bid.