A major Yahoo shareholder, Legg Mason, is ready to back Yahoo's effort to stay independent if Microsoft lowers its buyout offer, the Wall Street Journal said, citing an interview with portfolio manager Bill Miller.  

"The problem is Microsoft blundered with the letter this weekend," Miller told the Journal, referring to Microsoft Chief Executive Steve Ballmer's letter to Yahoo giving it three weeks to evaluate the $42 billion takeover offer, after which it threatened to resort to a proxy battle.

"Telling the shareholders you're going to take something away from them is not a way to get their support," Miller told the Journal. 

Yahoo countered Microsoft's deadline earlier this week, saying the offer still undervalued it and that the threat of a proxy battle was counterproductive. In a letter to Ballmer, Yahoo said it would only be open to a better deal.

The support of major Yahoo shareholders is vital for both companies at this stage. 

Miller said he believes Microsoft will end up paying what it takes to own Yahoo and brushed away the notion that Yahoo could find an alternate deal that shareholders would like.

Microsoft, Yahoo and Legg Mason representatives were not immediately available for comment.

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