UPDATE 1-Microsoft investors growing weary of Yahoo plans

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By Svea Herbst-Bayliss

BOSTON, Feb 13 (Reuters) - Money manager Robert Olstein did not mince words when he chided software giant Microsoft Corp (MSFT.O) for offering $42 billion for Web pioneer Yahoo Inc (YHOO.O).

"I want Microsoft to say 'Sayonara Yahoo' and walk away," said Olstein, who owns roughly 1 million Microsoft shares. He wrote the company this week to say exactly that.

"Under no circumstance should you raise your price," he wrote to the Redmond, Washington-based company's chief financial officer, Christopher Liddell.

Olstein is not alone among Microsoft investors unhappy with the world's biggest software maker's unsolicited bid for Yahoo, an offer that has emotions running high on both sides.

Since Microsoft made the offer, its stock is down 11 percent, sinking its market capitalization by some $34 billion. Many on Wall Street expect Microsoft to raise its bid.

Yet some investors balk at the initial price. Skeptics want more detail on how the deal will pay off and are concerned that it would distract management at a time when the company -- and investors -- were starting to enjoy the success of Windows Vista and the profitability of the Xbox video game franchise.

Roughly half of the 100 largest Yahoo shareholders, including Legg Mason and T. Rowe Price, also own Microsoft stock, according to shareholder data through September.

Microsoft surprised Yahoo with an uninvited $31-per-share bid and said it expected to save at least $1 billion in costs from the acquisition, but it has not outlined details.

"Microsoft has yet to explain how this would be a good deal," Pat Becker, Jr, chief investment officer at Becker Capital Management, said after speaking with executives at Microsoft, who he said failed to detail the financials.

Becker noted they were worried "about letting the cat out of the bag and tipping off Yahoo."

Some investors are against Microsoft focusing on any businesses that are not its core desktop software franchises, analysts said, remembering similar complaints about Microsoft's Xbox video game console. But this time many investors worry Microsoft's takeover of Yahoo would be a dramatic shift in strategy that would preoccupy management.

"Instead of talking about Windows and other things, all of the questions are going to be about Yahoo," Becker said.

Already many of Microsoft's large institutional investors, including Wellington Management Co, have trimmed their holdings, people familiar with the trades said.

Microsoft's share price was down nearly 17 percent from its January high to close at $28.96 on Wednesday.