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Jul 14 2008 5:34PM EDT

Microsoft, Icahn, and Yahoo in Hissing Contest

Sam Gustin observes: Another day, another round of recriminations in the ongoing Microsoft/Yahoo/Icahn saga.

Thirty-six hours after Yahoo turned down what it called a "ludicrous" proposal from Microsoft to buy its search business, the software giant and financier Carl Icahn released dual press releases today attacking Yahoo's characterization of the negotiations that took place over the weekend.

Microsoft said, contrary to Yahoo's claims, that it made its new offer for Yahoo's search business only after Yahoo chairman Roy Bostock approached Steve Ballmer and signaled the company's openness to a search-only deal.

Microsoft also denied that it gave Yahoo 24 hours to accept or reject the deal, and said that its proposal made no mention of governance changes at Yahoo.

Icahn, meanwhile, issued a blistering release in which he said he had never seen "a company distort, omit and twist events and facts in the manner that Yahoo! has done in their press release" issued over the weekend.

The financier seemed particularly nonplussed over Yahoo's apparently new-found willingness to accept $33 per share for the entire company, after turning down that amount just months ago.

Referring to Yahoo, Icahn said, "It is hard to understand why it turned down $33 and is now willing to accept it. It is the same obfuscation that is so prevalent in the rest of the press release. DON'T BE FOOLED."

And despite Yahoo's contention that Microsoft's offer would require the immediate replacement of Yahoo's top management and board, Icahn said that he is willing entertain leaving some of Yahoo's board intact and keeping Jerry Yang on as Chief Yahoo.

Given the hostility evinced in the various communiques issued by the parties, Yahoo's fate looks like it will be settled by a shareholder vote at its annual meeting on Aug. 1.

Expect the rhetoric to get even nastier as that date approaches.

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