Microsoft backs Icahn's bid to oust Yahoo board

The prospect that a changing of the guard at Yahoo might pave the way to a friendly deal with Microsoft lifted Yahoo shares $2.56, or 12 percent, to finish Monday at $23.91.

Echoing previous remarks in its battle with Icahn, Yahoo questioned Microsoft's interest in buying the entire company.

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

But Icahn said Microsoft doesn't want to risk making a bid under Yahoo's current regime, because the software maker fears Yahoo's management would make more poor decisions during an antitrust review that would take at least nine months.

"If the current board and management team of Yahoo mismanage the company (and their recent track record is far from reassuring), Microsoft would be putting its money at risk and a great deal could be lost," Icahn wrote in his letter to shareholders.

Microsoft's willingness to work with Icahn undermines one of Yahoo's chief arguments for re-electing its board.