Microsoft Needs to Boost Yahoo! Bid, Bill Miller Says

SAN FRANCISCO -- A well-respected money manager for Legg Mason Capital Management is arguing that Microsoft(MSFT Quote) must up the ante if it wants the merger with Yahoo!(YHOO Quote) to happen.

Bill Miller of Legg Mason, Yahoo!'s second-largest shareholder with more than 80 million shares, wrote in his quarterly newsletter that the deal is "a strategic imperative for MSFT, and that YHOO is in a tough spot if it wishes to remain independent."

Yahoo! on Monday officially rejected Microsoft's $31-a-share bid for the company, calling it a substantial undervaluation of its brand name and growth potential. Yahoo! is reportedly holding out for a bigger payout of $40 a share. ...