After waiting over two months for Yahoo!'s board of directors to get its act together, Microsoft has finally lost patience. The software giant over the weekend threatened that it would bring its takeover bid directly to Yahoo!'s shareholders and initiate a proxy contest to elect an alternative slate of directors for the Yahoo! board.

"The pace of the last two months has been anything but speedy," Microsoft CEO Steve Ballmer wrote in an open letter to Yahoo!'s board. "It has now been more than two months since we made our proposal to acquire Yahoo! at a 62% premium ... Our goal in making such a generous offer was to create the basis for a speedy and ultimately friendly transaction."

Yahoo!, of course, has spent most of the past two months seeking an alternative to Microsoft's offering. None came: Potential partnerships with Google, AOL, News Corp., and others paled in comparison to Microsoft's extravagant bid. Then Yahoo! tried a new tact: It performed a one-week financial road show, trying to convince analysts that its future earnings potential was so high that the Microsoft bid was undervalued. No one was convinced. In fact, in the intervening months it's become quite clear that Yahoo! is absolutely directionless. If anything, the Microsoft bid is vastly overpriced.

Microsoft apparently agrees. In its open letter this past weekend, Ballmer derided the lack of meaningful negotiation between the companies and the Yahoo!'s board's inability to meet the needs of its shareholders. "By any fair measure, the large premium we offered in January is even more significant today," Ballmer asserted. "We believe that the majority of your shareholders share this assessment, even after reviewing your public disclosures relating to your future prospects."

Then Ballmer dropped the bomb. "If we have not concluded an agreement within the next three weeks, we will be compelled to take our case directly to your shareholders, including the initiation of a proxy contest to elect an alternative slate of directors for the Yahoo! board," Ballmer wrote. "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." That's right: Microsoft is considering lowering its bid for Yahoo!.

Yahoo!'s board remained silent about the offer it can't refuse throughout the weekend. Early Monday, however, the company issued a statement of its own, one that offers the first hint of reconciliatory language. "We are not opposed to a transaction with Microsoft if it is in the best interests of our stockholders," the letter, credited to Yahoo! CEO Jerry Yang and chairman Roy Bostock, reads. "Our position is simply that any transaction must be at a value that fully reflects the value of Yahoo!, including any strategic benefits to Microsoft, and on terms that provide certainty to our stockholders."

The letter then derides Ballmer's "threat" as counterproductive and claims that the Microsoft letter mischaracterized Yahoo!'s actions since the Microsoft bid was first announced.

There's no winner here. Microsoft is offering far too much for a company that is clearly spinning wildly out of control and has no clear short- or long-term financial upside. Merging Yahoo's listless online properties into Microsoft's own poorly-performing online business will simply result in a number two player in the industry that is even more dysfunctional than the current independent entities, one that is saddled by tens of billions of dollars of debt.

Put simply, I can't imagine why Yahoo! hasn't latched onto the Microsoft offer as the overvalued bailout package that it is. But I also can't imagine why Microsoft would even want Yahoo! in the first place. These guys are absolutely clueless.