A flurry of letters and public statements Monday saw Microsoft lending its clear support to billionaire investor  Carl Icahn as he continued to wage a proxy contest seeking to gain control of Yahoo on August 1, when shareholders of the beleaguered Web pioneer hold their annual vote for directors. Yahoo responded to Microsoft's endorsement of Icahn's plan to oust the current board, which includes co-founder and chief executive Jerry Yang, urging the Redmond, Washington-based software giant to make a new proposal immediately, and repeated its contention that Microsoft was the party that walked away from any deal. Microsoft Says It Would Return To Negotiating Table Microsoft would be willing to return to the negotiating table with Yahoo to acquire the firm outright or to forge an Internet search advertising deal, as long as Sunnyvale, California-based Yahoo replaces its current board of directors, the world's largest software maker said in a Monday statement. Yahoo shareholders would face a weaker financial outcome if Icahn succeeds in his push to replace the Yahoo board with his own slate of directors, Yahoo said in its own statement issued in response to the earlier Icahn letter. Negotiations led by Icahn "would not lead to an outcome that would be in the best interests of Yahoo stockholders," Yahoo said as it continued to state it would be willing to reopen talks with Microsoft. Icahn held several lengthy discussions with Microsoft chief executive Steven A. Ballmer last week, which led him to write a letter to Yahoo shareholders on Monday expressing his belief that Microsoft would be likely to resume negotiations with a Yahoo headed by a new slate of directors hand-picked by Icahn. "Steve made it clear to me that if a new board were elected, he would be interested in discussing a major transaction with Yahoo, such as either a transaction to purchase the search function with large financial guarantees or, in the alternative, purchasing the whole company," Icahn wrote in the letter to Yahoo shareholders. "Steve made it abundantly clear that, due to his experiences with Yahoo during the past several months, he cannot negotiate any transaction with the current board," Icahn added. Yahoo Stock Prices Driven Up Microsoft's interest in resuming talks with an Icahn-controlled Yahoo helped drive up share prices in the second most used search engine to their highest levels since February 1, when Ballmer's firm made its initial offer public. Yahoo stock rose nearly 12 percent in Monday trading, closing at $23.91 per share, an increase of  $2.56 per share, and continued rising in after hours trading. Monday's statement by Microsoft, which confirmed the position Icahn wrote about earlier in his letter, was its first offering official insight into the company's position regarding Icahn's proxy battle. "We confirm [...] that after the shareholder election Microsoft would be interested in discussing with a new board a major transaction with Yahoo," Microsoft said. No specific terms regarding the types of deals Microsoft would seek with Yahoo under new directors were released Monday. "As Mr. Icahn notes in his statement today, it would be premature to discuss at this time important details such as the price or other terms of a possible transaction," Microsoft said in the Monday statement. Ballmer has worried that the current Yahoo board could "mismanage" the firm during what would likely be a lengthy period under the scrutiny of regulators before receiving approval, Icahn wrote in his letter to Yahoo shareholders. "During this waiting period for regulatory approval, any acquirer -- not just Microsoft -- would want a steward they would feel comfortable with," Icahn said, while also reiterating earlier comments that he would seek to replace Yang should his proxy battle succeed. Yahoo Looks For "Actual Plan" From Icahn, Microsoft "I am moving towards getting a potential new management team for Yahoo including a new CEO," Icahn said in a recent Reuters report. Yahoo said it encouraged Icahn to disclose any "actual plan" that could lead to a deal with Microsoft. "If Mr. Icahn has an actual plan for Yahoo beyond hoping that Microsoft might actually consummate a deal which they have repeatedly walked away from, we would be very interested in hearing it," Yahoo said in the Monday statement. "If Microsoft and Mr. Ballmer really want to purchase Yahoo, we again invite them to make a proposal immediately," the Sunnyvale firm added. Icahn has said that Yahoo's board of directors made a flawed move when it refused Microsoft's takeover bid valued at $47.5 billion at the time, because it was detrimental to maximizing financial gains for Yahoo shareholders. Microsoft Lends Support To Icahn In Yahoo Proxy Contest Yahoo will hold its annual shareholder meeting on August 1 in San Jose, California, during which Icahn is expected to seek to have his alternate slate of board members elected, replacing current Yahoo board members including Yang with directors more  agreeable to selling Yahoo to Microsoft. Some Yahoo shareholders, who have expressed their displeasure with the company for not accepting a Microsoft offer that was valued at more than a 60 percent premium when initially made, may be likely to react positively to a push for Icahn's slate of directors at the annual meeting. Since Microsoft withdrew its bid on May 5, Icahn has purchased some 10 million shares of Yahoo stock and options to buy 49 million more, valued at more than $1.5 billion, representing more than 4 percent of the firm, and controls a total of 69 million shares of Yahoo. Yahoo has encouraged its shareholders to re-elect the slate of nine directors it has nominated, and to vote against Icahn's alternate slate. "Our board of directors unanimously recommends a vote for the election of all of the board’s nominees," Yahoo said earlier this year in a United States Securities and Exchange Commission filing. Related Links:
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