Icahn to battle Yahoo to accept Microsoft bid

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while Microsoft rose 1.7 percent to $30.45, both on Nasdaq.

Rough Road For Yang

Industry watchers said Yang faces a rougher road dealing with Icahn, a blunt-spoken financier known for bare-knuckle takeover tactics, than with Microsoft CEO Steve Ballmer.

"If Jerry Yang had a tough time dealing with Steve, wait till he meets Carl Icahn," said Colin Gillis, a Canaccord Adams analyst.

A bigger threat, said Gillis, will be if Microsoft is unwilling to come back to the table. "It's not clear that he has a buyer. We think that Microsoft has really walked away."

Others said there is a reasonable chance of revived talks, arguing that the strategic rationale for Microsoft's initial interest in Yahoo hasn't changed in the last two weeks.

The proxy contest gives new wind to annoyed shareholders who felt Yang overplayed his hand in turning down Microsoft's $33 per share offer, holding out for a higher price.

"We view this as a very positive development," said a portfolio manager at a large investment firm that holds Yahoo shares. "Getting some new blood on the board would be very beneficial."

'Win-Win' For Holders

Icahn said he sought clearance from the US Federal Trade Commission to buy up to about $2.5 billion in Yahoo stock. In a regulatory filing, he said he now holds 4.3 percent, including 9.9 million shares and 49 million call options.

One analyst said things are now looking up for Yahoo stockholders. Shares jumped from $19.18 prior to Microsoft's initial $31-per-share bid to nearly $30 in early February, only to dive to about $24 when talks collapsed on May 3.

"Barring procedural objections, (Yahoo investors) are now in an almost win-win situation," Sanford C. Bernstein analyst Jeffrey Lindsay wrote in a note.

"Either the existing Yahoo management team now proposes an alternative -- most likely a paid search outsourcing deal with Google. Or the Icahn slate gets elected and reopens negotiations to sell the company to Microsoft," Lindsay said. "Icahn's bid now forces the issue."

Icahn's slate of nominees includes himself, Frank Biondi, a former Viacom Inc chief, and Keith Meister, vice chairman of Icahn Enterprises LP.

Mark Cuban, owner of the Dallas Mavericks professional basketball team and co-founder of cable network HDNet, is also on Icahn's slate. Cuban struck it rich after he sold Broadcast.com to Yahoo in 1999 for about $5 billion.