Yahoo deal on the brink

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Microsoft on Thursday threatened to walk away from its offer to buy Yahoo for about $31 a share if the Internet search portal doesn't rein in its "unrealistic expectations of value."

For several days, Microsoft CEO Steve Ballmer has been encouraging Yahoo to accept its offer, and on Thursday it was CFO Chris Liddell's turn.

If Yahoo keeps dragging its feet, he said, Microsoft is prepared to either drop the matter entirely or launch a proxy battle by taking the offer directly to shareholders.

Liddell made his remarks during a conference call with analysts to discuss Microsoft's fiscal third-quarter earnings, which some investors found lacking, leading to a 5% decline in Microsoft shares in after-hours trading.

"We have been clear that speed is of the essence to this deal," he said. "Unfortunately, the transaction has been anything but speedy and has been characterized by what would appear to be unrealistic expectations of value."

Microsoft's bid for Yahoo is in the $43 billion range, though it fluctuates based on the price of Microsoft stock. The software company has given Yahoo executives until the end of the week to make up their minds.

But while Microsoft maintains that it doesn't necessarily need Yahoo to compete effectively with Google, it reported Thursday that losses in its online division grew to $228 million from $171 million in the same quarter last year.

Overall, Microsoft net income fell 10.9% in the quarter to $4.4 billion on revenue that grew fractionally to $14.45 billion. The results beat expectations on the bottom line, though not on the top line.
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