In a letter to shareholders, Yahoo!’s Roy Bostock (Chairman) and Jerry Yang (CEO) have explained that the Microsoft offer will benefit Microsoft more than it will Yahoo!, and that Carl Icahn’s proposed new board won’t add value to the company.

Like a wounded animal, Yahoo is hoping to find its escape by an alliance with Google instead of a take-over by Microsoft.

In this latest letter, the beseiged company is appealing for shareholders to keep the current board rather than vote for Carl Icahn’s proposed replacements. (See below).

With Google waiting (rather more patiently) in the wings, Yahoo loyalists led by Bostock and Yang, are hoping they can move forwards with Google’s 10 year plan bringing $800 Million per year instead of Microsoft’s $7.73 billion investment and $1bn-per-year deal.

It looks like it will come down to a battle between those who are emotionally involved in the culture and values of Yahoo! against those who are driven by optimizing the financial outcome.

Let me know how you think the Internet would change if there were no more Yahoo! – would you miss it?

Reading between the lines, I suspect Icahn has little to do with it, and it is more a case of the Internet protecting its precious own. Only a couple of days ago it was announced that Google were in high-end talks with Yahoo about matters beyond the current advertisement-sharing model. Unlikely to be a all-out takeover, analysts have predicted a rescue package which will start slowly and gather pace for mutual advantage.

Meanwhile, Yahoo’s shareprice has plummeted while Microsoft remain aloof and disinterested about their previous takeover bid.

Yahoo!’s recent departees have included Stewart Butterfield and Caterina Fake (co-founders of Flickr), Jeff Weiner, Usama Fayyad, Jeremy Zawodny and JR Conlin.

Each of them are giving no solid reasons for their departure, in fact Stewart Butterfield’s strange resignation letter only adds further intrigue to the riddle.

Watch this space… and listen out in a couple of weeks for an announcement of what they’re all up to.

The plot thickens. Do contribute with a comment if you know more…

Carl Icahn has announced the nominees for his board of Yahoo!:

Mark Cuban – Sold Broadcast.com to Yahoo! in 1999 for $8.1 billion in stock.

John Chapple – Former CEO of Nextel Partners, with a telecommunications investment fund.

Lucian Bebchuk – Harvard Law professor and director of Harvard’s program on corporate governance

Edward Meyer – Former CEO of Grey Global Group, the worldwide advertising agency.

Keith Meister – Icahn’s own vice chairman. He was also added to Motorola’s board last month as part of the agreement to avoid a proxy battle with Icahn.

Brian Posner - Former CEO of asset management firm, Clearbridge Advisors LLC.

Adam Dell - brother of Michael, the founder of Dell Computers. He was previously a major shareholder of HotJobs.com, which Yahoo! bought for $439 million in 2002.

Robert Shaye – founder of New Line Cinema and still co-CEO.

Frank Biondi Jr – Former CEO of Viacom Inc. Also a director of Amgen, Cablevision Systems, Hasbro, The Bank of New York Mellon and Seagate Technology.

And the tenth member:
Carl Icahn himself – 72-year-old investor, and corporate shaker.

As anticipated, Carl Icahn has begun his proxy battle with Yahoo!

In an open letter to Yahoo chairman, Roy Bostock, Icahn said the board had “acted irrationally and lost the faith of shareholders and Microsoft. It is obvious that Microsoft’s bid of $33 per share is a superior alternative than Yahoo’s prospects on a stand alone basis.”

He went on to urge Yahoo! to “move expeditiously to negotiate a merger with Microsoft, thereby making a proxy fight unnecessary.”

Alongside his support from Bill Miller, Icahn’s move has further support from at least one other major shareholder, Paulson & Co. with a 3.4 percent stake in Yahoo!

But Microsoft are showing no signs of returning to the table. Yesterday, Microsoft spokesman, Frank Shaw said simply “The company has moved on”.

Its final offer of $33 wasn’t enough to satisfy Yahoo!’s co-founder and Chief Executive Jery Yang, who wanted $37 per share, even though shares had been trading at around $19 prior to that.

For the current share price, and its movement over the last 5 days, see below.

HAVE YOUR SAY: What do you think the future holds for Yahoo!? Drop me a comment…