And the company’s proposed advertising partnership with Google (GOOG) has been delayed due to the Justice Department’s ongoing related antitrust review.

And its lucrative stakes in two Asian Internet firms–Alibaba.com and Gmarket–have lost 22 percent of their value, or $2.1 billion, since Yahoo assessed them in July.

And its quarterly profit and sales are expected to fall short of consensus estimates because of what CEO Jerry Yang likes to call headwinds.

Now that Yahoo is trading at $12.63 in an economy that’s falling Homer Simpson-style down the long rocky slope of economic collapse, some of the company’s institutional investors are hoping to convince it to sell itself to Microsoft (MSFT). Mithras Capital Partners, which holds about 1.9 million shares of Yahoo, has proposed selling the company to Microsoft for $22 a share, a 74 percent premium on Yahoo’s current stock price, but something of a discount over the $31-per-share Microsoft once offered and the $40-a-share for which Yahoo had hoped.

In a letter to the two companies, Mithras suggested Microsoft acquire the Internet underachiever, sell off its Asian assets and nonsearch businesses and extract $3 billion worth of cost savings and $2.8 billion of tax benefits. That would essentially mean that the Software giant would pay $10.3 billion for Yahoo’s search business, $2 billion less than it planned to spend back in July. “It is imperative for Microsoft to act now, while the Yahoo-Google deal is mired in regulatory concerns, and before Yahoo strikes a deal with AOL,” said Mark Nelson, a partner at Mithras. “It is imperative for the Yahoo board to embrace this proposal as the best outcome for long-suffering Yahoo shareholders.”

I suppose. But if Yahoo’s board felt $31-a-share “massively undervalued” the company, what will they think about $22?

As you might recall, at the time that Microsoft and Yahoo stopped talking, Ballmer had been trying to cut a deal in which Microsoft would buy Yahoo’s search business. The letter indicates that the proposed transaction would have included Microsoft buying $8 billion of YHOO shares at $35 apiece, acquiring Yahoo’s search assets for $1 billion, and assuming the operations and R&D expenses for search while returning data back to Yahoo for use in its advertising operations.

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What makes this especially interesting is that Mithras was founded by Mark Nelson, who in 1998 sold a search technology company he founded and took public called Ovid Technologies to Wolters Kluwer for $200 million.

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