Local News

SUNNYVALE (CBS 5 / AP) ― Microsoft Corp. has set the clock ticking on Yahoo!

Microsift sent a letter to the Yahoo Board of Directors Saturday setting a three-week deadline for moving forward on its $41 billion buyout offer, warning that otherwise the software maker would launch a hostile takeover at a less attractive price.

The letter signed by Microsoft CEO Steve Ballmer said Microsoft will take its case directly to Yahoo shareholders and work to elect a new slate of directors, if the Yahoo board does not respond by the deadline of April 26.

"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," Ballmer wrote.

"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," the letter said.
 
A Yahoo spokeswoman declined to comment Saturday.

The bid to buy Internet pioneer was made toward the end of January and announced Feb. 1.

In his letter, Ballmer said Yahoo's search share and page views, two measures of the strength of the Web portal company's business, appear to have fallen since the offer was made.

At the time, Microsoft offered $44.6 billion or 62 percent above Yahoo's market value. The deal is currently valued at about $41 billion, based on Friday's closing share prices.

Yahoo's board formally rejected Microsoft Corp.'s bid, saying it undervalued the company.

The Silicon Valley company has since explored alliances with Google Inc., News Corp.'s MySpace.com and Time Warner Inc.'s AOL, but no alternative to Microsoft's offer has surfaced.

Ballmer acknowledged these alternative negotiations in the letter and questioned why, in the absence of another offer, Yahoo was still dragging its heels and not negotiating with Microsoft.

"This is despite the fact that our proposal is the only alternative put forward that offers your shareholders full and fair value for their shares," Ballmer wrote in the letter. "During these two months of inactivity, the Internet has continued to march on, while the public equity markets and overall economic conditions have weakened considerably."

Ballmer said the Microsoft offer has grown stronger as the time has passed.

"We believe that the majority of your shareholders share this assessment," he wrote.

Yahoo and Microsoft both lost less than 1 percent of their share of U.S. Web searches in February, the most recent month for which data are available, according to the research group comScore. During that month, Yahoo grabbed 21.6 percent of searches, more than Microsoft's 9.6 percent. Google Inc.'s share rose less than 1 point to 59.2 percent.

In the intervening weeks, Yahoo released internal projects drawn up in December that call for the company's revenue to rise more than 70 percent during the next three years.

The Web company also postponed its annual shareholder meeting, and thus the deadline for Microsoft to nominate its own slate of directors to fill Yahoo's board. A new date has not been set.

Microsoft has said from the start that it would consider all possible ways of getting the deal done, including taking its offer directly to Yahoo's shareholders, as well as working to elect its own candidates to fill Yahoo's board.

Before Saturday, it was known that Microsoft had hired a proxy solicitation firm to help with a hostile bid, but the software maker had made no pronouncements as to when that might happen.

(© 2010 CBS Broadcasting Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.)