Icahn to Yahoo board: Sell to Microsoft or leave

A Yahoo representative said the company would respond to Icahn "soon."

Yahoo shares rose 61 cents, or 2.3 percent, to finish Thursday at $27.75. That's the stock's highest closing price since Microsoft broke off talks.

While Icahn made it clear he wants Yahoo sold to Microsoft, there are no guarantees the software maker is still interested in buying its rival.

A Microsoft spokesman declined to comment on Icahn's letter, saying the Redmond, Wash.-based company has "moved on."

Besides Icahn, the alternate slate of nominees includes Cuban, who sold Broadcast.com to Yahoo for $8.1 billion in stock in 1999. Cuban used part of his Yahoo windfall to buy the Dallas Mavericks, a National Basketball Association franchise that he still owns. He called upon Yahoo to sell to Microsoft in a February blog posting.

If Yahoo can't find a way to placate Icahn, the battle threatens to distract Yahoo and the rest of the company's management from their turnaround efforts, said James Post, a Boston University professor specializing in corporate governance and ethics.

"Senior management cannot concentrate on managing the business when they are concentrating on managing critical relationships with angry shareholders," Post said.

And there's no doubt Yahoo shareholders are furious, said Darren Chervitz, co-portfolio manager of the Jacob Internet Fund, which owns about 100,000 Yahoo shares.

"There's a strong feeling that Yang and the board did not do their fiduciary duty," Chervitz said. "They had a very strong offer on the table and did everything to brush it aside, if not sabotage it."

Paulson & Co., a New York hedge fund that owns 50 million Yahoo shares, said Thursday that it will back Icahn's alternate slate of directors if Yahoo's board doesn't negotiate a sale to Microsoft.