Business Tech

As finalization of a Microsoft-Yahoo search deal reportedly nears, activist investor Carl Icahn--who played a key role in trying to broker a broader partnership between the companies last year--is speaking out in favor of such an agreement.

"I've been a strong advocate of getting a search deal done with Microsoft," Icahn, who owns about 5 percent of Yahoo and sits on its board, told Reuters in a phone interview Friday. "It would enhance value if a deal got done, because of the synergies involved."

According to an All Things Digital report late Thursday, several top Microsoft players--including online executives Yusuf Mehdi, Satya Nadella, and Qi Lu--are in Silicon Valley to try to finalize a search deal with Yahoo.

The report says the two sides are "down to the short strokes" after years of closely watched on-again, off-again talks. A deal could come within a week, All Things Digital said.

Icahn, for his part, wouldn't comment on where the latest supposed negotiations between Yahoo and Microsoft stand, according to Reuters. Icahn was a central figure in Microsoft's highly scrutinized $47.5 billion takeover bid for Yahoo, which fell apart last November.

During the negotiations, he launched a proxy fight in a bid to take over Yahoo's board. Among his wishes was that then-CEO Jerry Yang step down. The company and Icahn eventually reached an agreement that got him a seat on the board, and the number of seats was expanded, with Yahoo appointing two new members from Icahn's slate of candidates.

Since the full-out acquisition fell through, both Microsoft CEO Steve Ballmer and current Yahoo CEO Carol Bartz have indicated they are open to some sort of a search deal.

As my CNET News colleague Ina Fried pointed out, with Microsoft's Bing getting some good reviews and Microsoft having billions in cash on hand, the pieces would seem to be in place if both sides have the will to make it happen.

Microsoft on Monday announced a new stock buyback program of up to $40 billion, sending its stock up more than 5 percent in premarket trading.

The software giant said it would repurchase up to $40 billion worth of its shares through September 2013. It recently completed a previous $40 billion buyback program.

Investors, who tend to cheer stock buyback programs because it makes existing shares in the market more valuable, pushed Microsoft's stock to $26.50 a share in premarket trading, up 5.33 percent.

Microsoft has seen its shares lose roughly 22 percent of their value since it announced its unsolicited bid for Yahoo earlier this year, which ultimately failed to take hold. And the beating that the broader markets have been taken in the interim also hasn't helped Microsoft's share price.

PC maker Hewlett-Packard also announced a stock buyback program Monday, authorizing up to $8 billion in shares to be repurchased.

The Redmond, Wash.-based company, meanwhile, also announced plans to pay a 13-cent quarterly dividend, which is an 18 percent increase over its previous quarterly dividend. The dividend will be payable on December 11 to shareholders of record as of November 20.

In addition to the stock buyback program and increased quarterly dividend, Microsoft is also planning to float out corporate debt of up to $6 billion. The proceeds from the debt offerings will be used for general corporate purposes, stock repurchases, and working capital.

Yahoo has reached a settlement with activist investor Carl Icahn, who will join the Internet company's board.

Icahn, who had proposed his own slate of board members, was agitating for the company to reach a deal to sell all or part of the company to Microsoft. Icahn and Microsoft officials had previously stated that they could not work with the existing Yahoo board.

As part of the settlement, Icahn, who owns about 68.7 million shares, or 4.98 percent of Yahoo common stock, has agreed to withdraw his nominees for consideration at the annual meeting and to vote his Yahoo shares in support of the board's nominees. Board member Robert Kotick will not seek re-election.

Eight members of Yahoo's current board of directors will stand for re-election at the scheduled shareholder meeting next month: Roy Bostock, Ronald Burkle, Eric Hippeau, Vyomesh Joshi, Arthur Kern, Mary Agnes Wilderotter, Gary Wilson, and Jerry Yang.

The board will expand to 11 members, adding Icahn and two other nominees from Icahn's slate.

It was not immediately clear whether the board would continue negotiations with Microsoft.

"While I continue to believe that the sale of the whole company or the sale of its search business in the right transaction must be given full consideration, I share the view that Yahoo's valuable collection of assets positions it well to continue expanding its online leadership and enhancing returns to stockholders," Icahn said in a release. "I believe this is a good outcome and that we will have a strong working relationship, going forward. Additionally, I am happy that the board has agreed in the settlement agreement that any meaningful transaction, including the strategy in dealing with that transaction, will be fully discussed with the entire board before any final decision is made."