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Yahoo takes the long road to Redmond

Most outsiders think Yahoo's road show with investors leads down one path--a deal with Microsoft.

Without a competing suitor to push Microsoft's unsolicited bid higher, Yahoo is turning to its investors to get that job done.

Yahoo, which announced Tuesday its three-year financial plan to investors and cited it would provide more "context" to its rejection of Microsoft's initial bid of $31 a share as undervaluing the Internet company, is following a familiar game plan when a better offer isn't on the hook, say proxy solicitors.

"Usually executives don't spend time on a road show when there's nothing for investors to vote on. Microsoft isn't asking Yahoo shareholders to exchange their shares, and there's no Microsoft (opposition slate of) directors to vote on," said one proxy solicitor who requested anonymity. "Usually management's time is spent finding and working with potential acquirers to extract more value than the current offer, but absent that, they'll use other bidders."

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Yahoo is seeking to use its road show as a means to bring a significant number of its investors in lockstep to push Microsoft to raise its bid. Yahoo may face the added burden of having a number of its largest shareholders also owning an even larger chunk of Microsoft in their portfolio and less likely to demand the Redmond giant pay top, top dollar. But don't forget about the hedge funds and arbitragers who don't fall into that camp, said the proxy solicitor.

As for the timing of Yahoo's investor dog-and-pony show, a couple of sources said the process takes a while to get into presentable form--even though Yahoo's board had given its blessing to the three-year plan late last year.

The timing of the roadshow should not be viewed as a defensive move by Yahoo to keep its stock price up should Microsoft pull its bid; as part of a strategic maneuver to scare Yahoo to the table; nor as a sucker punch to Microsoft that would give Yahoo executives more road show time with investors after having delayed the deadline for Microsoft to go hostile and name it opposition slate, said sources.