March 13: D-day for Microsoft's Yahoo intentions

Mark your calendars. The next milestone in the ongoing Microsoft-Yahoo saga is March 13: The last day the software giant can propose a slate of directors to launch a proxy fight for Yahoo.

If Microsoft is planning to launch a proxy war for Yahoo--something that may not make sense given it's a multi-month distraction for both parties--Steve Ballmer & Co. need to get going on its $44.6 billion offer. Perhaps more interesting will be what happens if Microsoft doesn't launch a proxy fight. According to Reuters, Ballmer doesn't sound all that worried. He said Microsoft's offer for Yahoo is fair and there is dialogue about alternatives. Microsoft CFO Chris Liddell, speaking at the Morgan Stanley Technology Conference, said that Yahoo hasn't responded to its offer formally.

Could Microsoft walk away? There's an argument to be made that Microsoft could get Yahoo cheaper as growth in online advertising slows due to a weak economy. It's a bit of a gamble, but Microsoft could do the following with little risk:

• Walk away;
• Watch Yahoo shares fall from the Microsoft-bid inspired prices today;

• See if Yahoo stumbles;
• Swoop back in at a better price later.

That scenario could be downright scary to Yahoo investors since it's far from clear that there are any alternatives. To Microsoft, there's no financial hit. In fact, Microsoft's market cap would head higher and it could possibly cook up a better acquisition strategy.

Meanwhile, Yahoo would likely struggle. It's quite possible that the Microsoft bid has already hobbled Yahoo a bit. In its annual report last week, Yahoo cited the distractions associated with the Microsoft bid as a risk factor.

In its annual report, Yahoo said:

"Microsoft's unsolicited acquisition proposal has created a distraction for our management and uncertainty that may adversely affect our business... The review and consideration of the Microsoft proposal (and any alternate proposals that may be made by other parties) have been, and may continue to be, a significant distraction for our management and employees and have required, and may continue to require, the expenditure of significant time and resources by us. Microsoft's unsolicited acquisition proposal has also created uncertainty for our employees and this uncertainty may adversely affect our ability to retain key employees and to hire new talent. Microsoft's unsolicited acquisition proposal may also create uncertainty for current and potential publishers, advertisers and other business partners, which may cause them to terminate, or not to renew or enter into, arrangements with us."

It's Microsoft's move, but letting Yahoo dangle for a bit may make sense.