Yahoo gets deadline to respond to Microsoft's takeover bid

Microsoft has given a forewarning to Yahoo that it will directly approach its shareholders if the company board fails to respond to its $44.6 billion takeover bid within three weeks. The company also warned that the Yahoo’s failure to act in response to the bid soon could lead to a lower offer price.

According to Microsoft CEO, Steve Ballmer, the companies have not had any meaningful talks in the two months since the launch of bid, which was a 62 percent premium to the stock price at the time.

Microsoft’s insistence may force Yahoo Chief Executive Officer Jerry Yang to initiate discussions in the direction of merger, in order to avoid a fight with the world's biggest software maker.

"Microsoft's preference has always been to offer a speedy and friendly transaction," says a person familiar with the matter. "Microsoft has tried to engage, but Yahoo's board has refused to enter into substantive negotiations. There is a difference between a meeting and a negotiation."

Microsoft, on combining with Yahoo would be able to unite the second- and third-most popular search engines in the U.S. that probably would give a harder fight to larger rival Google, which gets more than half the Internet queries in the country.

Yahoo cast off the $31-a-share cash-and-stock bid on Feb. 11, saying the price didn't reflect its value.

Making Microsoft reach Yahoo investors “will have an undesirable impact on the value of your company from our perspective, which will be reflected in the terms of our proposal,” Ballmer said in the statement, which included a letter to Yahoo shareholders.

Tracy Schmaler, a spokeswoman for Sunnyvale, California- based Yahoo, said she couldn't immediately commenton the issue.

Yahoo, last month, proclaimed that according to estimates, it would almost double its operating cash flow over the next three years and generate $8.8bn in revenue after costs in 2010.

"Yahoo provides meaningful strategic value and warrants a significant acquisition premium above its equity value in a potential change of control transaction," it said.