Microsoft letter backs Icahn, renews Yahoo focus

Microsoft on Monday released a letter in support of activist investor Carl Icahn's efforts to unseat Yahoo's board, as well as confirming its interest to explore a bid to buy the entire company--or just its search assets, with a new board.

Here is Microsoft's letter:

In the past week, we have had the opportunity to discuss with Carl Icahn the prospects for a possible agreement between Microsoft and Yahoo.

Despite working since January 31 of this year, as well as in the early part of last year, we have never been able to reach an agreement in a timely way on acceptable terms with the current management and board of directors at Yahoo.

We have concluded that we cannot reach an agreement with them. We confirm, however, that after the shareholder election, Microsoft would be interested in discussing with a new board a major transaction with Yahoo, such as either a transaction to purchase the "Search" function, with large financial guarantees or, in the alternative, purchasing the whole company.

As Mr. Icahn notes in his statement today, it would be premature to discuss at this time important details such as the price or other terms of a possible transaction. We respect the right of Yahoo's shareholders to determine the destiny of their company, and we do not intend to engage in ongoing commentary on these issues in advance of Yahoo's shareholder meeting.

As we explained on June 12, when Yahoo announced an agreement with Google, we believe that our proposed search acquisition and partnership would have delivered superior value to Yahoo's shareholders and the marketplace as a whole.

We have not changed our position, even as we continue to move forward with our own online search and advertising offerings. We therefore welcome interest by Mr. Icahn in pursuing this and other discussions.

While, of course, there can be no assurance of a future transaction, we will be prepared to enter into discussions immediately after Yahoo's shareholder meeting, if a new board is elected.