Microsoft backs Icahn's bid to oust Yahoo board

Yahoo has maintained that it would be foolhardy to back Icahn's slate of alternate nominees because Icahn had no concrete ideas besides selling the company to Microsoft — something that Yahoo has been depicting as a pipe dream since Microsoft withdrew a $47.5 billion offer in early May.

Microsoft reinforced that perception by refusing to revive its bid last month even after Yahoo's board signaled its willingness to accept the earlier offer.

With Microsoft in Icahn's corner, "the dynamic has changed," Sanford C. Bernstein & Co. analyst Jeffrey Lindsay said. "There is now a rationale for voting for Icahn's board because there now seems to be a real possibility for a deal again."

Monday's turn of events amplifies the pressure on Yahoo co-founder and CEO Jerry Yang, whose handling of the earlier negotiations with Microsoft infuriated many shareholders.

Yahoo's stock price had plunged by more than 30 percent to fall below $20 during Yang's first six months as CEO. Then, in January, Microsoft raised hopes for a quick windfall with its unsolicited takeover bid, only to be repeatedly rebuffed.

If he seizes control of the board, Icahn has promised to fire the 39-year-old Yang as CEO and replace him with a more seasoned leader.