Yesterday Yahoo! rejected another Microsoft Bid. This time it was driven by Carl Icahn through Microsoft chief, Steve Ballmer.

It was made on Friday and gave Yahoo! 24 hours to make up its mind.

The offer required the immediate resignation of the Yahoo! board so Roy Bostock, Chairman of Yahoo! said, “While this type of erratic and unpredictable behavior is consistent with what we have come to expect from Microsoft, we will not be bludgeoned into a transaction that is not in the best interests of our stockholders.”

Carl Icahn is clearly working closely with Microsoft to try and sculpure a deal before Yahoo! are cushioned by their revenues from the Google advertising deal.

As far as Yahoo are concerned however, Microsoft and Icahn’s offer is against the interests of Yahoo! shareholders. (Even though Icahn’s stake now exceeds 4% of Yahoo.)

Bostock also said, “This odd and opportunistic alliance of Microsoft and Carl Icahn has anything but the interests of Yahoo!’s stockholders in mind. Clearly, Microsoft, having failed to advance in search, is aligning with the short-term objectives of Mr. Icahn to coerce Yahoo! into selling its core strategic search assets on terms that are highly advantageous to Microsoft, but disadvantageous to Yahoo! stockholders.”

Officially, Microsoft’s offer to Yahoo! was rejected on the following grounds:

– The revenue guarantees suggested, which are conditional and subject to reduction, are well below the search revenue that the Company is expected to generate on its own and in association with its announced commercial agreement with Google. That agreement alone is estimated to generate $250 to $450 million of incremental cash flow for the first twelve months following implementation, while allowing Yahoo! to remain a principal in paid search;

– The success of the remaining Company is critically dependent on Microsoft’s ability to effectively monetize search;

– Microsoft/Icahn’s proposed Traffic Acquisition Costs rates are below market;

– The proposal calls for Yahoo! to sell its industry-leading algorithmic search business and its related strategic and valuable intellectual property portfolio for no incremental consideration; and

– Many of the components of the headline value that Mr. Icahn and Microsoft put forward, such as the spin-off of the Yahoo!’s Asian assets and the return of cash to stockholders, are steps that could be taken by Yahoo! on its own and the Board continues to evaluate these options.

Competition is a good thing. We all know that. And now, as Microsoft goes on the hunt for corporate partners to help break up Yahoo!, Yahoo! gets scrutinized in a monopoly investigation for holding hands with Google.

As your comments to my previous posts testify, we all want to see competition breeding more creativity at the top of the Internet industry. But whichever way Yahoo turns right now, it looks like a backward step.

Are there really only 2 options? Does it have to be either Microsoft OR Google. Or is it possible that an investment angel can swoop in to keep Yahoo! independent and free it from the vultures.

Who could it be?

News Corp?… Time Warner?

Each of these would have good reason, if only to assist Myspace and AOL respectively.

Or perhaps Microsoft will succeed in embracing both these players in a joint take-over deal and dividing the spoils between them.

Wouldn’t it be ironic if the company with the highest competition legal bills in history, is subsequently responsible for fragmentizing its arch rival?

Google-hoo!

Google and Yahoo! are prevented from starting work on their combined search advertising deal for 100 days while the US Dept of Justice investigates it.

The deal would give them 80% of the web search market. Now that can’t be a good thing…!

So which would you rather? Google, Microsoft, or a Microsoft-led sell-off.

Or has anyone got Warren Buffet’s telephone number? – perhaps he could step in to give the industry a future inclusive of Yahoo! as we know it.

Which outcome do you prefer?

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…

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…

“To the extent he can get the parties back to the table I’d be all in favour of that”, he said.

Miller’s endorsement indicates a significant portion of Yahoo! is leaning towards the Microsoft deal.

It is one thing for a board to have pressure from its shareholders, yet another to have that pressure intensified by a rush of new shareholders.

Yahoo!’s shareprice will start at $27.14 this morning. Interesting to see how it moves through the day…

This is how it stands currently, and a chart of the past 5 days (delayed 15 mins)…:

<a href=”http://finance.yahoo.com” mce_href=”http://finance.yahoo.com”>Yahoo! Finance</a><br /><a href=”http://finance.yahoo.com/q?s=YHOO/” mce_href=”http://finance.yahoo.com/q?s=YHOO/”>Quote for YHOO/</a>

Although we’re told that Microsoft have given no indication that they will resume talks with Yahoo!, Icahn now has the power to replace the Yahoo! board with one which will be more open to the takeover bid.

Bill Miller’s endorsement means that few would stand in his way if he chose to do that, but he hasn’t got long.

The news over the next few days will be vital to the future of the whole Internet industry. Watch this space…

Many senior Internet Industry exectutives and investors are currently waiting to hear the decision of this man…

No matter how small or big you consider your online business to be – (it may be so small that you don’t even think you have one – or so big that you’re even involved in this latest saga I’m discussing here) – either way, I’ll be interested to hear what you think of Carl Icahn’s recent move on Yahoo!

In the 10 days since Microsoft pulled out of of its $47.3bn offer, which valued Yahoo! at $33-a-share, Carl Icahn has bought a stake of approximately 3.6%.

Considering his purchase price was somewhere around $25, a 3.6% stake will have cost him around $1.2 billion.

This is a man with a personal fortune of $14 billion or so, so pitting 1.2 of it on Yahoo! in its current crisis is bold. Perhaps we should expect nothing less from the real-life Gordon Gekko of Wall Street… Who remembers his infamous hostile takeover of TWA in 1985?

But there is something very significant about buying such a stake at this time: It gives him the option to launch a proxy battle and ultimately to remove members from Yahoo!’s board in favour of directors who support his own views.

And guess what they are…

To accept Microsoft’s offer.

If he can sell his Yahoo! shares for $33 then his personal gain will be around half a billion dollars. And it could all happen in a matter of days.

Perhaps its a shame he doesn’t have better intentions for the troubled pioneering search engine than to feed his bulging pockets.

Or perhaps we should just celebrate and cheer-on such flagrant capitalism…

Lets watch what happens over the coming days – if nothing else, his move is certain to bring the players back to the table, and it will make interesting viewing…

What’s your view? What have I missed? Leave your comment below…