Five major investment houses that together hold more than $50 billion worth of shares in both Microsoft msft and Yahoo yhoo could lose big if Microsoft pays $35 to $40 a share for Yahoo.

That's because those holdings are heavily weighted toward Microsoft shares — and any increase in the bid price above the standing offer of $31 a share, or $44.6 billion, would ratchet down Microsoft's already sinking share price even more, stock analysts say.

Microsoft declined comment, as did spokespeople for Capital Research and Management, Barclays Global Investors, State Street, Vanguard Group and Goldman Sachs Group, the five big investment houses that hold large blocks of Microsoft and Yahoo shares.

Microsoft CEO Steve Ballmer appears to be under rising pressure by big shareholders to make the $31-a-share opening offer stick. One reason: Paying $35 to $40 a share for Yahoo would drive down Microsoft's projected earnings through its 2011 fiscal year, says Robert Breza, tech stock analyst at RBC Capital Markets.

Breza recalls that big investors avoided Oracle orcl shares for 18 months after it acquired PeopleSoft and wouldn't touch Hewlett-Packard hpq shares for years after it bought Compaq. "This deal needs to get done quickly and in a friendly way," says Breza. "Then, I think it will take, at minimum, another 12 months for investors to come back to Microsoft."

Yahoo on Monday rejected the $31-a-share offer, giving rise to speculation that it is courting a white-knight investor, such as AOL or News Corp. nws, to help it stay independent. A source briefed on the matter says talks to sell a 20% stake to media giant News Corp. are highly unlikely to result in anything. The source requested not to be named because talks are ongoing.

A tie-up with AOL would boost Yahoo's online advertising efforts but be expensive to consummate, says Shahid Khan, principal analyst at IBB Consulting Group. "It may distract Yahoo from getting its own act together," says Khan.

Jeffrey Lindsay, an analyst at Sanford C. Bernstein, says reported talks with potential white knights are "a ploy to drive up Microsoft's bid offer." Lindsay expects Microsoft to hold firm for now at $31, then perhaps up the bid to $35 or $36 within two weeks. "The pressure will really be on Yahoo to accept," he says.

Ballmer's next move may be to rally big shareholders to back a hostile takeover bid, says David Mitchell, senior vice president of IT research at Ovum. That could take the form of a tender offer made directly to shareholders or a proxy fight to win control of the Yahoo board.

"Unless Yahoo gives details of an alternative plan that will realize more value for these (institutional investors), then I can see a good chance that they will want to take the bird in the hand from Microsoft," says Mitchell, adding that he expects Microsoft to "ramp up hostile activity in the next day or so."

As co-founder of tech investment firm Revolution Partners, Peter Falvey has helped sell several companies to Microsoft. He agrees that Microsoft seems likely to resist sweetening its offer. "Everyone assumes they will pony up more money because they're Microsoft," says Falvey. "But Microsoft got where it is by not caving in."

Big investors in Yahoo who do not hold any Microsoft shares obviously want to see more cash on the table. In a Feb. 10 letter to investors in Legg Mason, which holds more than 100 million shares of Yahoo, portfolio manager Bill Miller called for Microsoft to "enhance its offer if it wants to complete a deal."

But Miller also acknowledged that Microsoft "will do what it takes" to consummate the deal and that it "will be hard for (Yahoo) to come up with alternatives that deliver more value than (Microsoft) will ultimately be willing to pay."

Acohido reported from Seattle, Swartz from San Francisco. Contributing: David Lieberman in New York