Microsoft has reduced its bid for Yahoo, according to Sillicon Valley Insider. When Microsoft made its surprise $44.6 billion bid on Yahoo last week, the company was offering to pay about 26% over Yahoo's market value - a fairly solid amount of slack to lure Yahoo shareholders. However, as the Sillicon Valley Insider reports, the value of Microsoft's offer has dropped considerably since then. Microsoft's $44.6 billion offer is actually split up as half cash and half Microsoft shares, with a fixed exchange ratio of 0.9509 Yahoo shares for every Microsoft share, the Insider says. The problem is, Microsoft's share price has dropped from $33 to $29 since the bid was announced, so Microsoft's offer now stands at an effective $29.50 per share. In the meantime, Yahoo's share price has climbed to almost exactly $29 since the offer was made. This means that unless Yahoo shareholders are willing to accept a reduced offer, Microsoft could soon find itself in hot water.