In a Saturday letter from Microsoft CEO Steve Ballmer to the Yahoo board, Ballmer strongly hinted that if the deal goes hostile, the original $44.6 billion offer would be reduced.
"During these two months of inactivity, the Internet has continued to march on, while the public equity markets and overall economic conditions have weakened considerably, both in general and for other Internet-focused companies in particular. At the same time, public indicators suggest that Yahoo!'s search and page view shares have declined," the letter said. "The substantial premium reflected in our initial proposal anticipated a friendly transaction with you. 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."
The Wall Street Journal on Saturday reported that "people close to Microsoft told the Journal this week that the company wouldn't consider raising its offer before formal negotiations between the two sides begin. Yahoo's board has been unwilling to initiate talks on the basis the original offer which it said substantially undervalues the Internet company. Yahoo has also held talks about a partnership with several other parties, including Google Inc., Time Warner Inc.'s AOL unit and News Corp., owner of MySpace and The Wall Street Journal. But so far, these discussions haven't resulted in an agreement."