- Paul Bond, The Hollywood Reporter

NEW YORK Microsoft on Thursday threatened to walk away from its offer to buy Yahoo! for roughly $31 a share if the Internet search portal doesn't rein in its "unrealistic expectations of value."

For several days, Microsoft CEO Steve Ballmer has been encouraging Yahoo! to accept its offer, and on Thursday, it was CFO Chris Liddell's turn.

If Yahoo! keeps dragging its feet, he said, Microsoft is prepared to either drop the matter entirely or launch a proxy battle by taking the offer directly to shareholders.

Liddell made his remarks during a conference call with analysts to discuss Microsoft's fiscal third-quarter earnings, which some investors found lacking, leading to a 5 percent decline in Microsoft shares in after-hours trading.

Microsoft's bid for Yahoo!, though, seemed foremost on Liddell's mind. He addressed the matter early in the conference, cautioning that he didn't have anything more to say about it, then revisited the issue later in the call.

"We have been clear that speed is of the essence to this deal," he said. "Unfortunately, the transaction has been anything but speedy and has been characterized by what would appear to be unrealistic expectations of value."

Liddell said Microsoft wasn't about to raise its bid "simply because we can afford to," adding that the company could choose instead to spend its money by growing organically or on other acquisitions.

Microsoft's bid for Yahoo! is in the $43 billion range, though it fluctuates based on the price of the company's stock. The software giant has given Yahoo! executives until the end of the week to make up their minds.

But while Microsoft maintains that it doesn't necessarily need Yahoo! to compete effectively with Google, it reported Thursday that losses in its online division grew to $228 million from $171 million in the same quarter last year.

Overall, Microsoft net income fell almost 11 percent in the quarter to $4.4 billion on revenue that grew fractionally to $14.45 billion. The results beat expectations on the bottom line, though not on the top line.

Microsoft's entertainment and devices division was surprisingly healthy, mostly because of big sales for the Xbox 360 game console. That division grew revenue 68 percent to $1.58 billion, while operating income swung from a negative $324 million to a positive $89 million.

Microsoft said it surpassed an accumulative 19 million Xbox units sold during the quarter.

This story updates and replaces an item posted earlier today with Liddell's remarks.