When Bill Gates says an offer is fair (http://www.theregister.co.uk/2008/02/19/gates_on_yahoo/), he means it.

According to The New York Times' DealBook blog (http://www.nytimes.com/2008/02/19/technology/19cnd-yahoo.html?scp=1&sq=yahoo%21&st=nyt), Microsoft will soon spark a Yahoo! proxy fight rather than up its $44.6bn bid for the beleaguered Web portal.

An increased bid would cost the company billions more, but sources tell DealBook that Microsoft could launch a proxy battle simply by spending an extra $20m to $30m on a proxy solicitor and some letters to Yahoo! shareholders.

From the beginning, Redmond has said it "reserves the right to pursue all necessary steps to ensure that Yahoo!'s shareholders are provided with the opportunity to realize the value inherent" in its takeover bid. And as DealBook points out, Yahoo! may have difficulty suppressing a proxy fight. All of the company's directors face re-election this year - the board isn't staggered, as they say - and a mere plurality of votes can put new names in place.

Microsoft has offered what amounts to $31 a share for Jerry Yang's baby. Upping this offer just a dollar per share would cost the company an extra $1.4bn, and from Redmond's perspective, Yahoo! isn't worth an extra penny. "We sent them a letter and said we think that's a fair offer," Gates told The AP. "There's nothing that's gone on other than us stating that we think it's a fair offer... They should take a hard look at it."

In other words, give in or get ready for a proxy fight. ®

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