Updated from April 6Microsoft ( MSFT) is giving Yahoo! ( YHOO) a clear ultimatum: Negotiate an acquisition or prepare for a fight. In a letter to the Yahoo! board Saturday, Microsoft CEO Steve Ballmer said his company is tired of waiting for Yahoo! to work out a deal. If an agreement isn't made in three weeks, Ballmer said Microsoft would take its case straight to Yahoo! shareholders and launch a proxy battle to elect alternative directors to Yahoo!'s board. "It has now been more than two months since we made our proposal to acquire Yahoo! at a 62% premium to its closing price on January 31, 2008, the day prior to our announcement," Ballmer wrote. "Our goal in making such a generous offer was to create the basis for a speedy and ultimately friendly transaction. Despite this, the pace of the last two months has been anything but speedy." Ballmer also implied that Microsoft will lower its offer if it has to force a deal. "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," he wrote. Microsoft announced its offer for Yahoo! on Feb. 1, a move clearly aimed at putting a dent in the Web dominance of Google ( GOOG). Before that announcement, Yahoo! shares were trading at $19.18, but they jumped to more than $28 on the news. Yahoo! was down 1.6% at $27.90 in premarket trading Monday. Microsoft rose 1.5% to $29.60. Ballmer's letter came one day after Reuters reported Microsoft was "evaluating" its offer based on worsening market conditions. Yahoo! responded by saying it wasn't opposed to an arrangement with Microsoft if it was in the best interests of its shareholders. "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 company said. Additionally, Yahoo! said it is "steadfast in our commitment to choosing a path that maximizes stockholder value and we will not allow you or anyone else to acquire the company for anything less than its full value."