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Icahn Pushes, Again, to Put Yahoo Back in Play

Perhaps Yogi Berra was right. It's not over until the robust female opera singer has her say.

That's apparently the case in this week's latest round of revelations that discussions for Microsoft to buy at least the search portion of Yahoo's business are back open.

Monday saw a flurry of public statements flashing around the Internet as all parties jockeyed for position in a race that never quite seems to end.

However, this time the talks are between corporate raider Carl Icahn, who is lofting his own slate of candidates for a new Yahoo board, and Microsoft, which badly wants to move from number three to number two in the search race against dominant player Google (NASDAQ: GOOG).

Microsoft first announced it would attempt a takeover of Yahoo in late January when it offered some $44.6 billion for the search company. However, after repeated rejections of any deal by CEO Jerry Yang and other Yahoo executives, saying that the offer wasn't good enough, Microsoft dropped its bid in early May.

Icahn jumped in soon afterwards, purchasing a large number of shares and beginning a proxy fight for control of Yahoo.

While nothing is likely to be settled until Yahoo (NASDAQ: YHOO) holds its annual meeting on August 1, Icahn's letter reveals that, should Icahn win out in his quest to take over the search firm's board, Microsoft (NASDAQ: MSFT) is still in a mood for acquiring at least the search portion of Yahoo's assets.

Icahn fired the opening shot in this latest battle Monday, when he issued an "open letter" to Yahoo shareholders, citing several recent long conversations he had held with Microsoft CEO Steve Ballmer.

A problem with Yahoo's board

"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's letter said.

"Steve [also] 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.

While the move may surprise some, any observer who has watched Ballmer for very long knows how tenacious he can be when he really wants something.

Extending the extremely public conversation further, Microsoft responded with its own statement confirming Icahn's assertions.

"While of course there can be no assurance of a future transaction, we will be prepared to enter into discussions immediately after Yahoo’s shareholder meeting if a new board is elected," Microsoft's statement said.

Icahn left no doubt as to his intentions in his open letter. If successful he will "immediately start negotiation with Microsoft to sell the whole company or, in the alternative, sell 'search' with large guarantees [and] move expeditiously to replace Jerry Yang with a new CEO with operating experience."

By mid-day, Yahoo had chimed in with its own two bits. In a move that seemed to be pushing any blame off of Yahoo management, the company instead pointed its finger at Microsoft.

"Yahoo's Board of Directors continues to stand ready to enter into negotiations with Microsoft Corporation for an acquisition of Yahoo. Indeed, as recently as June, Yahoo's independent directors and management approached Steve Ballmer about just such a transaction, only to be told that Microsoft was no longer interested even in the price range which they had previously proposed," Yahoo's response stated.

As for whether a Microsoft and Yahoo deal can be accomplished, however, that is still anybody's guess. After all, Icahn could fail to remake the board in his favor. Also, the question of price remains a sticking point with Ballmer and could still be a deal killer, though it sounds like Ballmer and Icahn may have already started negotiations. All could still fall through, though. Both Icahn and Ballmer are known as aggressive and sophisticated negotiators.

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