Microsoft Holders Moody After Yahoo! Reprise

Updated from 2:19 p.m. EDT

SAN FRANCISCO -- Microsoft(MSFT Quote) investors have taken a dim view of the company's proposal for an alliance with embattled Yahoo!(YHOO Quote).

In timing that positions Microsoft as a white knight instead of a nemesis, the Redmond, Wash., software company announced Sunday that it had proposed to Yahoo! "an alternative that would involve a transaction with Yahoo! but not an acquisition of all of Yahoo!."

Investors took that to mean that a merger between the two, something Microsoft said it would not rule out, could still take place. In Monday trading, Microsoft's stock closed down 53 cents, or 1.8%, to $29.46, while Yahoo! was up 2 cents to $27.68. ...