Microsoft's CEO Steve Ballmer has threatened directly Yahoo's board with a hostile takeover which may reduce the company's value below their initial takeover offer. In a letter, the software leader has said through its ruthless chief executive that it will take those measures if a deal will not be reached within three weeks.

"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," Microsoft Chief Executive Steve Ballmer wrote in a letter sent to Yahoo's board yesterday.

The initial offer made by Microsoft on February 1 was $31 a share, adding up to a grand total of approximately $44.6 billion but after a downfall in Microsoft’s shares, it is now worth about $42 billion, still making it, if finalized, the biggest-ever takeover in the high-tech industry.

On February 11, Jerry Yang rejected the Microsoft’s bid saying that it undervalues the company. Yahoo asked for a $12 billion raise in Microsoft’s offer, which has not happened so far. Rumors have it that Microsoft already turned to Bear Stearns Cos. Services in the Yahoo situation.

It is common knowledge that Yahoo has been searching for a backup option to Microsoft’s offer, discussing different partnership scenarios with Google, AOL and the News Corporation. However, no deal has been struck so far.

Last month, Microsoft’s Chief Software Architect Ray Ozzie said the company is not in a hurry to merge its technology platform to that of Yahoo. Ozzie commented in an interview with the Financial Times that “technology companies, if they dive in and just smash things together for smashing them together’s sake, it’s reckless, it’s just simply reckless,” adding that Yahoo has its own technologies and corporate culture.

At the same time, Ozzie declared himself optimistic that Microsoft will be able to achieve its main goals if the deal with Yahoo will materialize, as long as they will focus on giving users and advertisers the same experience, rather than rushing into getting financial benefits from the deal.