Microsoft: We'll deal with a new Yahoo board
Yahoo replies that it would consider an offer now.
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| After Carl Icahn sent a letter to Yahoo shareholders on Monday, Microsoft said it would be open to reviving negotiations with a new Yahoo board. |
(Fortune) -- Remove Yahoo's board and Microsoft might be interested in a deal again, the software giant and Carl Icahn said Monday.
In a letter to Yahoo (YHOO, Fortune 500) shareholders, Icahn said he's had several conversations with Microsoft (MSFT, Fortune 500) CEO Steve Ballmer that "have lasted as long as an hour." Icahn's takeaway, according to his open letter, is that an acquisition of Yahoo is too financially risky for Microsoft given the poor performance of Yahoo's board.
According to Icahn, Microsoft's fear is that if it committed to buy the search business or the whole company, Yahoo's board and top executives would continue to "mismanage the company" for the nine months or so it would take for the deal to pass regulatory review.
In a reply Monday, Yahoo said it would welcome an immediate offer for the entire company.
Icahn is eager to remove Yahoo CEO Jerry Yang and his team, which Microsoft has identified as impediments to successful merger negotiations.
In a follow up to Icahn's letter, Microsoft released its own statement Monday saying it sees no hope for a deal with the current board, but "would be interested in discussing with a new board a major transaction with Yahoo."
The Icahn letter and the Microsoft statement are the latest moves in a fitful five-month courtship between Microsoft and Yahoo. Yahoo shares jumped 9% Monday on word that a deal of some kind may be possible.
In its statement Monday, Yahoo said Ballmer and Icahn have "teamed up in an apparent effort to force Yahoo into selling to Microsoft its search business. We feel very strongly that this would not lead to an outcome that would be in the best interests of Yahoo's stockholders."
Last month, in a Fortune story by Yi-Wyn Yen, a Microsoft source pooh-poohed rumors that the software giant had a revived interest in buying Yahoo in its entirety. In May, Microsoft walked away from a $33-a-share offer for Yahoo, and angry shareholders placed the blame on Yahoo's board for failure to make the deal happen.
Microsoft, however, has remained open to discussing an alternate deal. The day after Yahoo said talks were off for good, Microsoft's top advertising executive Kevin Johnson revealed in a letter to employees that the company had returned with a partial offer to buy Yahoo's search business for $1 billion and invest another $8 billion in Yahoo.
Yahoo brought on more Microsoft scorn when it signed a search advertising outsourcing deal with rival Google (GOOG, Fortune 500). The move was a blow to Microsoft, which has been pursuing Yahoo to fend off Google's gains.
Icahn and his group have named a slate of candidates to replace Yahoo's current board. In an attempt to turn up the pressure before Yahoo's Aug. 1 shareholder meeting, Icahn noted that Google's income from operations grew 59% for the past two years while Yahoo's shrank 21% each year. 
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