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Microsoft Tosses In Support For Tossing Out Yahoo Board

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The Associated Press

Published: July 8, 2008

SAN FRANCISCO - SAN FRANCISCO - Microsoft Corp. threw its weight behind investor Carl Icahn's effort to oust Yahoo Inc.'s board next month, saying Monday that a successful rebellion would encourage the software maker to renew its takeover bid for Yahoo or negotiate another multibillion-dollar deal.

The development gives Icahn a huge carrot to dangle before shareholders as he wages a campaign to oust Yahoo's nine directors at the company's annual meeting Aug. 1.

Microsoft's support of Icahn also intensifies the pressure on Yahoo co-founder and chief executive Jerry Yang, whose handling of the earlier sales negotiations with Microsoft infuriated many shareholders.

If he seizes control of the board, Icahn has promised to fire the 39-year-old Yang as CEO and replace him with a more seasoned leader.

Icahn has been arguing that a purge of the Yahoo board is the only way to salvage a deal with Microsoft - a position that the Redmond, Wash.-based software maker backed with its statement Monday.

Yahoo has been urging shareholders to re-elect its current board, arguing that Icahn's plan was based on the idea that Microsoft would renew its takeover bid - something Yahoo had been maintaining wasn't in the cards.

Yahoo offered more skepticism Monday, even after Microsoft raised the prospect of a renewed bid after a changing of the guard. The Sunnyvale, Calif.-based company said it thinks Microsoft CEO Steve Ballmer is more interested in buying Yahoo's online search engine than the entire business.

"If Microsoft and Mr. Ballmer really want to purchase Yahoo, we again invite them to make a proposal immediately," Yahoo said.

Although it stopped short of officially endorsing Icahn's slate of candidates, Microsoft made it clear that it didn't think it could negotiate a deal with Yahoo's current board.

"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 said.

Yahoo shares soared $2.56, or almost 12 percent, to close at $23.91 Monday.

Microsoft didn't say whether it would be willing to buy Yahoo at the same price - $47.5 billion, or $33 per share - that it offered two months ago. Ballmer withdrew that bid after Yang sought $37 a share, a height that Yahoo's stock hasn't reached in 21/2 years.

Yahoo's board tried to persuade Microsoft to renew the $33-per-share offer last month, only to be rebuffed. Microsoft instead tried to buy Yahoo's online search engine and a 16 percent stake in Yahoo's remaining operations.

Yahoo, however, opted for an online advertising partnership with rival Google Inc. that is supposed to boost its annual revenue by $800 million. That alliance faces an antitrust review by the U.S. Justice Department because Google and Yahoo combined control more than 80 percent of the U.S. search advertising market.

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