Yahoo! has told shareholders that its current management and strategy will create value in the face of Microsoft's bid, while Microsoft is now believed to be considering other acquisitions such as Facebook.
The besieged internet company's defiant position was expressed in a letter to shareholders from Jerry Yang, chief executive of Yahoo!, in response to comments earlier in the week by Legg Mason, its second biggest shareholder.
Legg Mason, which owns almost 7% of Yahoo!'s shares, endorsed the idea of the deal with Microsoft, but at a higher price.
Yang said: "This is a great company and we are moving quickly to make it even better."
The letter is being interpreted as an attempt to capture hearts and minds, whilst taking the sting out of criticisms that Yang acted too slowly in tackling Yahoo!'s poor financial and operational performance.
Yang's letter continued: "We are well on our way to transforming the experience of Yahoo's users, advertisers, publishers and developers -- an important shift that is at the heart of our plan to create stockholder value."
The Yahoo! co-founder added that one of his key objectives is to increase visits to key properties such as My Yahoo and Yahoo Mail, where people enter the web, by 15% a year.
Microsoft is believed to considering its options after Yahoo! rejected its $44.6bn (£23bn) approach.
The company could raise its offer for Yahoo! or abort its attempt and use the cash to buy other internet companies.
There has been intense speculation by analysts on Wall Street that Microsoft could start such a buying spree with a bid for Facebook, in which it bought a small stake for £120m in October.
Microsoft's stake valued Facebook at $15bn, dwarfing previous bids by Yahoo! that valued the social networking site at $1bn and $1.6bn.
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