Yahoo gets investor support in efforts to fend off Microsoft

Yahoo has yet to get a white knight to step forward and defend the search giant, but on Tuesday, it scored a reconfirmation of an endorsement from Legg Mason, its second-largest shareholder, according to a report in The Wall Street Journal.

Bill Miller, Legg Mason's portfolio manager, said his firm would cast its support to Yahoo if Microsoft reduces its current unsolicited bid, which is currently valued at $29.17 a share, according to the report.

"If Microsoft lowers the price, I'm not prepared to say that's better than Yahoo remaining independent," Miller said in the report.

When Microsoft initially announced its unsolicited buyout bid on February 1, the deal was valued at $31 a share. But as Microsoft's stock has fallen since the deal was announced, so has the transaction value of the deal. The price is based on a combination of cash and the value of Microsoft's stock, though Yahoo shareholders would have their choice whether to take that buyout price in all cash or all stock.

Legg Mason has not been shy in expressing its views on Microsoft's bid. When the deal was announced two months ago, Legg Mason shortly came out in support of a higher bid for Yahoo than Microsoft's initial $31-per-share offer.

Miller, in his interview with the Journal, said he considered the initial buyout bid too low, since prospective buyers don't usually start the acquisition process with a final offer as their first bid.

And how does Miller feel about the current value of the deal now? It's "not something I'm too excited about," he said in the report.

Miller's Legg Mason Value Trust doesn't hold any Microsoft shares, according to the Journal. As a result, Miller's portfolio doesn't have to worry about robbing Peter to pay Paul.

But a number of Yahoo's other major shareholders do. According to a recent report by RiskMetrics, 90 percent of Yahoo's institutional investors hold shares in both stocks. And of this group, 15 of Yahoo's top 20 institutional investors held more Microsoft shares than Yahoo. The report, however, was released in mid-February, so the investor mix has likely changed since then.

Miller, meanwhile, indicated that he would support Yahoo in a proxy fight, if Microsoft reduces its bid.

"The idea that we're going to vote in a dissident slate of directors, and they're going to get a better price than Yahoo's independent directors, would have limited credibility," Miller told the Journal.

But one major institutional investor for Yahoo feels otherwise. The investor told CNET News.com on Saturday, following the release of Microsoft's three-week deadline for Yahoo to do a deal with the software giant, that he previously told Yahoo's independent directors he might support an opposition slate, if the search company does not move forward with a deal.

Any other investors want to step into the mix?