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Microsoft Loses Cool, Gives Yahoo Three-Week Ultimatum


A tightened noose
is rarely pleasant

Microsoft has sent Yahoo a letter stating it has three weeks to move on its $44.6 billion buyout offer.

If the companies fail to form a pact by then, "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," wrote CEO Steve Ballmer of Microsoft.

90 percent of Yahoo's shareholders are also major Microsoft shareholders. Most have more money invested in Microsoft. Faced with seeing it overpay for Yahoo versus ousting Yahoo's board, it isn't unlikely they will choose the latter.

Ballmer also threatened to reduce Microsoft's bid if Yahoo cannot make its mind up in three weeks. Yahoo's board is currently reviewing the letter, Reuters reports.

Microsoft made the unsolicited bid for Yahoo in early February. A week later Yahoo formally declined on grounds that, at $31 per share, the offer was too low.

The company later considered other potential mergers or strategic relationships, including one in which it would become a kind of gatekeeper for News Corp.'s internet assets. CEO Rupert Murdoch of News Corp. later said he would not risk Microsoft's wrath for Yahoo's neck.

Last month, Yahoo tried to buy thinking time by extending a deadline to nominate board directors. But following the recent approval of the Google/DoubleClick merger, a pairing between the two search/online advertising giants might ultimately prove wise.

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