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Yahoo, Microsoft Bid Talk Heating Up

Yahoo (NASDAQ: YHOO) is not opposed to Microsoft's (NASDAQ: MSFT) bid for the Web media company, as long as it is at the right price, Yahoo's board said on Monday in a letter to Microsoft CEO Steve Ballmer.

"We have continued to make clear that we are not opposed to a transaction with Microsoft if it is in the best interests of our stockholders," the Yahoo letter said. "Our position is simply that any transaction must be at a value that fully reflects the value of Yahoo, including any strategic benefits to Microsoft and on terms that provide certainty to our stockholders."

On Saturday, as blogged by InternetNews.com, Microsoft's CEO gave the embattled Web pioneer a hard-fisted deadline to come to the bargaining table in good faith before the bid turns hostile. Ballmer also vented about the pace the process has taken.

"It has now been more than two months since we made our proposal to acquire Yahoo at a 62 percent premium to its closing price on Jan. 31," Ballmer wrote in a letter dated April 5, reiterating that Microsoft's initial offer was "generous."

"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 also indicated that if Yahoo continued to stonewall, Microsoft might lower its bid, initially valued at $44.6 billion, or $31 a share.

Yahoo was responding to a three-week deadline issued by Ballmer in a letter to Yahoo on Saturday for the company to agree to Microsoft's $31 a share cash-and-stock offer or risk seeing the bid lowered. By hinting at a lower bid, Microsoft was also responding to a weakened economic climate since the original bid surfaced.

Yahoo shares slipped 2 percent in premarket trading to $27.80, after closing at $28.36 on NASDAQ on Friday.

Directors of Sunnyvale, Calif.-based Yahoo rebuffed Microsoft's original offer in February, saying it undervalued Yahoo and that it is seeking alternatives.

"Our board has been actively and expeditiously exploring our strategic alternatives to maximize stockholder value, a process that is ongoing," Yahoo's board said on Monday. "All of these actions have been driven by our overarching commitment to maximize stockholder value.

"Our board's view of your proposal has not changed. We continue to believe that your proposal is not in the best interests of Yahoo and our stockholders."

Yahoo shareholders and analysts say Yahoo's best options are to find an ally to help demonstrate the company is worth more as an independent player, or surprise the market with a strong show in its quarterly results.

The consensus on Wall Street is that no "white knight" will emerge to whisk Yahoo away from Microsoft and its proposed cash-and-stock offer currently valued at $42.2 billion.