Microsoft backs Icahn's bid to oust Yahoo board

Microsoft Corp. threw its weight behind investor Carl Icahn's effort to dump Yahoo Inc.'s board, saying Monday that a successful shareholder rebellion would encourage the software maker to renew its bid to buy Yahoo's Internet search engine or possibly the entire company.

The unexpected endorsement gives Icahn a carrot to dangle before Yahoo shareholders as he wages an acrimonious campaign to replace Yahoo's nine directors at the company's annual meeting Aug. 1.

It marks the first time that Microsoft has publicly sided with Icahn since the billionaire investor launched his attempted coup nearly eight weeks ago.

The two sides decided they could work together after Icahn held "frequent" discussions with Microsoft Chief Executive Steve Ballmer and some of his top lieutenants during the past week, according to a letter that Icahn sent Monday to Yahoo shareholders.

Industry analysts said Icahn now has more credibility with Yahoo shareholders because he has been arguing that a purge of Yahoo's board is the only way to salvage a deal with Microsoft.

"This breathes new life into Icahn's proposal," said Stanford Group analyst Clayton Moran. "It really pushes the power to Icahn and his board (nominees)."