Microsoft threatens to bypass Yahoo’s directors

In a move to speed up the purchase of search engine firm Yahoo, Microsoft has written a letter to the Yahoo board of directors threatening to take its proposal directly to Yahoo’s shareholders if an agreement is not reached in the next three weeks.

If Yahoo continues to take no action, Microsoft warned it is likely to reduce its offer, and set up a proxy contest to elect an alterative set of directors for the Yahoo board.

“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,” wrote Microsoft chief executive Steve Ballmer in his letter, also noting a deterioration in Yahoo’s business. “Public indicators suggest that Yahoo’s search and page view shares have declined,” Ballmer wrote.

Microsoft has been growing increasingly frustrated with the lack of negotiation between the two firms since its proposal. “We understand that you have been meeting to consider and assess your alternatives, including alternative transactions with others in the industry, but we’ve seen no indication that you have authorised Yahoo management to negotiate with Microsoft,” said Ballmer.

“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, gives every shareholder a vote on the future of the company, and enhances choice for content creators, advertisers, and consumers,” he added.

Yahoo has declined comment, but according to reports, Yahoo is planning to send Microsoft a letter today stating that it is not opposed to the deal but believes Microsoft should pay more than $31 a share.