In completely predictable move that nonetheless is generating lots of attention, Yahoo Inc.’s (NDAQ: YHOO) largest shareholder has criticized Microsoft Corporation’s (NDAQ: MSFT) threat to wage a proxy battle and lower its offer.

Legg Mason Inc. owns around 7% of Yahoo, giving portfolio manager Bill Miller obvious incentive to try and drive the offer price up.

In a WSJ interview, Miller said, “Telling shareholders you're going to take something away from them is not a way to get their support,” in a reference to Microsoft’s threat to simply pull its bid. Of course, in reality telling shareholders that the deal will soon be off the table seems to be a very good negotiating tactic for Microsoft. Yahoo shares were trading around the $20 per share mark prior to Microsoft’s $29 per share bid, and Yahoo shares are likely to stay around $20 for a long time if the deal doesn’t happen.

Miller would understandably like Microsoft to raise its offer – what Yahoo shareholder wouldn’t? But with no viable alternatives for Yahoo, why should Microsoft bid against itself?

The very need for Miller to speak out against Microsoft’s threat proves the threat is already working: Yahoo’s largest shareholder is worried that the Microsoft deal will disappear.

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The U.S. economy may be headed into a recession, but e-commerce sales are estimated to grow 17% to $204 billion this year. The Forrester Research report sees a continued increase in e-commerce spending as value-shoppers go bargain hunting and affluent investors seeking the comfort and convenience of shopping from home. This is great news for many online retailers as well as online marketing companies.

"From higher shipping costs to changes in consumer shopping habits, online retailers are not immune to the current economic climate," said Scott Silverman, executive director of Shop.org. "But the fact that online sales will increase substantially this year demonstrates the resilience of the channel and is a testament to the value and convenience most customers find when shopping online."

Companies like Amazon.com Inc. (NDAQ: AMZN) and eBay Inc. (NDAQ: EBAY) stand to benefit the most from the increased online spending given their market leadership positions. Unfortunately, much of this growth is already priced into the stocks. Amazon.com trades at 68x earnings with a P/E to growth ratio of 2.19, which means that the stock may be overvalued given its most recent growth. Meanwhile, eBay is trading at 125x earnings with a P/E to growth ratio of 1.25, which makes it a little more affordable.

The Forrester Research report also indicated that search engine marketing continues to be the most effective way to reach new customers. In fact, 90% of all online retailers use pay-for-performance search placement and 79% said they will make such tactics an even greater priority this year. Currently, the survey found that around 35% of all sales comes from search engine marketing venues.

These increases should help boost stocks like Google Inc. (NDAQ: GOOG) who rely on search engine marketing for much of their income. Other potential benefactors include Yahoo Inc. (NDAQ: YHOO) and Microsoft (NDAQ: MSFT), who both have their own online ad platforms that many online retailers use to advertise their services in an increasingly competitive market.

"What’s spearheading online retail sales growth is a tale of two shoppers that visit the web for very different reasons," said Sucharita Mulpuru, Forrester Research principal analyst and lead author of the report. "The casual shopper goes online to look for the best price, leveraging the transparency of the Internet to save money. However, more affluent customers appreciate the convenience of shopping online and are not necessarily looking for the best deal. Retailers would be wise to recognize there are significant opportunities within both audiences and should market to them accordingly."

In the end, this is great news for the only positive segment of the retailing market.

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Washington Mutual's (NYSE: WM) dreams came true today after it announced a $7 billion capital infusion from an investment syndicate led by private-equity firm TPG. Unfortunately, shares dropped after the bank then announced a higher-than-expected $1.4 billion preliminary write-off for the first quarter and a move to slash its dividend to shore up capital. In the end, the good news offset the bad and shares gave back their earlier gains.

Washington Mutual, like many other banks, has found itself under substantial pressure amid rising defaults. The firm's loan loss provisions for the first quarter alone will run $3.5 billion with a net write-off expected to come in at around $1.4 billion. So, while the $7 billion in additional liquidity is good news, the bank may yet face substantial capital concerns going forward. That's not to mention the significant dilution that shareholders will experience.

Fortunately, Washtington Mutual has a series of plans in place to improve its financial situation after this latest capital injection. The bank will significantly reduce its leverage once the new capital is in place, which makes it a far less risky institution. Additional, the planned elimination of its wholesale lending and home-loan centers will help it refocus on the much more stable retail banking sector that isn't completely reliant on real estate for success.

In the end, this is good and bad news for shareholders. The additional capital will enable the bank to reduce its exposure to loans and ensure its going concern. However, the additional capital also comes at a cost - share dilution. Overall, the move should be good for the long-term but difficult for the short-term.

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