Maybe Microsoft thinks it’s getting closer to putting Yahoo in a hammer lock, but here’s why time – and history – are not on its side.

Lobbed in at 62% above Yahoo Inc.'s stock price, Microsoft Corp.'s Jan. 31 offer for the Internet company appeared to be a knockout punch. These days, it looks more like a glancing blow.

Microsoft investors remain skittish about the combination, pushing Microsoft's price down 14% and in turn cutting the value of its original $31 cash-and-stock offer to $28.89. Yesterday, Yahoo's shares in 4 p.m. Nasdaq Stock Market composite trading were at $29.01, down 2.2%, or 65 cents, showing that its shareholders remain confident Microsoft will raise its offer.

That has made it riskier for Microsoft to follow through on its threat to mount a proxy fight aimed at ousting Yahoo's board. Some investors are saying they won't support the move unless Microsoft raises its $41.6 billion offer. Other investors are saying, if Yahoo doesn't enter negotiations with Microsoft in the meantime, they would support Microsoft's proxy contest with the expectation that the new directors would negotiate a sale at a higher price.

Takeover battles are rife with standoffs and ultimatums, and many investors and analysts are certain Microsoft will get Yahoo in the end. Yahoo's board remains under pressure to find a credible alternative to Microsoft's unwanted offer. But pressure rests on Microsoft, too, which would suffer a blow to its credibility and vision if it were unable to persuade Yahoo's shareholders to elect its representatives.

History isn't on Microsoft's side. In 63% of hostile approaches over the past five years, suitors have raised their initial offer, according to data from FactSet Research System Inc. Proxy fights waged as part of hostile acquisition attempts are far rarer. They represent less than 5% of all proxy fights since 2001, or 27 contests in all. Five of those 27 entanglements produced board seats for the hostile bidder, said FactSet.

Microsoft has until March 14 to nominate a slate of directors to replace the existing board. A vote wouldn't take place until Yahoo's next shareholder meeting, which is typically held in June. Yahoo's board rejected Microsoft's offer last week, saying it "significantly undervalues" the company.

Many Yahoo shareholders have been waiting for Microsoft to sweeten its bid from the original $31 offer and have said they are unlikely to support a plan for less than that. One major Yahoo shareholder said he "would have a hard time" selling shares at $31. The investor believes the company is worth significantly more and suspects a proxy battle would be hard for Microsoft to win with an offer below Yahoo's 52-week-high intraday price of $34.08. With the threat of a proxy battle, "what Microsoft is really trying to do is get Yahoo to the table" to negotiate a sale, this person said.

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