Yahoo vs. Icahn-War Of Words Hots Up.

The embattled Yahoo board has shot off a brief letter to Icahn in response to his post-proxy plan. 'Leaving aside Mr. Icahn's inaccurate interpretation of our retention plan, we again note that he has no credible plan to operate Yahoo. We believe that Mr. Icahn's suggestion that we cancel our retention plan would have a destabilizing impact on Yahoo and would clearly not be in the best interests of our shareholders. Furthermore, his suggestion that we put out a price probably to see if Microsoft will alter its stated position is ill advised. As we have stated numerous times publicly and privately, we are open to any transaction including a sale to Microsoft if it is in the best interests of shareholders.'

Yahoo is clearly sticking to its old line that it is still open to negotiations with Microsoft if the price is right. It is also successfully driving home the point that Icahn has no intention of running the company and only wants to sell it, most probably to Microsoft. Microsoft's silence has only served to confuse the shareholders. It clearly finds itself in a dilemma. If it comes forward to say that it wants to buy Yahoo that will certainly drive up the share price, and weaken its bargaining position. On the other hand if it keeps quiet then Icahn is certainly going to fail in his attempt to unseat Yahoo's board on August 1st. This is simply because most shareholders feel that if Icahn manages to gain control, Microsoft will have no incentive to pay more than $33 a share.

The plot is thicker than it appears at first sight. Icahn has launched his assault even while Yahoo and Microsoft are already engaged in negotiations. Does he want to broker a deal between the two companies or does he simply want to arm twist Yahoo's management into accepting Microsoft's next offer? Let's see what happens next.