"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," wrote Microsoft Chief Executive Steve Ballmer.
"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," he wrote.
A Yahoo spokeswoman declined to comment Saturday.
In the 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 end of January. At the time, Microsoft's cash-and-stock offer was valued at $44.6 billion, or 62 percent above Yahoo's market value. Judging by Friday's closing share prices, the deal is now worth just under $41 billion.
Yahoo's board formally rejected Microsoft Corp.'s bid in February, saying it undervalues the company.
Since then, the Silicon Valley company has 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. More Details>>