Microsoft formally voiced support Monday for billionaire investor Carl Icahn's attempt to replace Yahoo's board of directors, saying it...

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Microsoft formally voiced support Monday for billionaire investor Carl Icahn’s attempt to replace Yahoo’s board of directors, saying it would be ready to discuss a major transaction immediately after Yahoo’s upcoming annual shareholders meeting if a new board is installed.

The company’s statement, released shortly after another stinging rebuke of Yahoo by Icahn early Monday, presents Yahoo investors with a stark choice as they consider their vote ahead of the Aug. 1 meeting.

“If and when elected, I strongly believe that in very short order the new board would, subject to its fiduciary duties, be presenting to shareholders either a purchase offer for the whole company or a very attractive offer to purchase [just Yahoo’s search business] with large [financial] guarantees,” Icahn wrote, in a letter made public early Monday after several conversations in the past week with Microsoft Chief Executive Steve Ballmer.

Yahoo’s current board and management, after five months of fruitless talks with Microsoft, is apparently no longer able to secure such an option.

Microsoft stated bluntly, “We have concluded that we cannot reach an agreement with them.”

Yahoo made its own pitch to investors last week, emphasizing its strength as a stand-alone company and seeking to pin blame on Microsoft for their failure to reach a deal.

But in a statement Monday, Yahoo’s current managers seemed eager to sell:

“If Microsoft and Mr. Ballmer really want to purchase Yahoo!, we again invite them to make a proposal immediately. And if Mr. Icahn has an actual plan for Yahoo! beyond hoping that Microsoft might actually consummate a deal which they have repeatedly walked away from, we would be very interested in hearing it.”

With Monday’s explicit show of support from Microsoft in hand, Icahn will likely pressure managers of the large mutual funds that own much of Yahoo’s stock to join his side, said N. Venkat Venkatraman, chairman of the Information Systems Department of Boston University’s School of Management.

Some fund managers were concerned Icahn might not be able to coax Microsoft back to the table and, if he failed, had no plan for an independent Yahoo.

“[Microsoft’s support] gives Icahn the leverage to then systematically go out to the fund managers and say, ‘Are you with me?’ ” Venkatraman said. “… I think it will be very difficult for the fund managers not to take a position.”

With the poor performance of stock markets this year, fund managers may have little appetite for the long-term strategy of Yahoo CEO Jerry Yang and be more inclined to lock in gains through a Yahoo sale, Venkatraman said.

Gordon Crawford, manager of the Capital Research Global Investors fund, which owns some 6.5 percent of Yahoo, reportedly is leaning toward Icahn’s director slate, according to anonymous sources quoted by Kara Swisher on The Wall Street Journal’s All Things D blog.

Both Microsoft and Icahn emphasized that no future deal could be assured.

Yahoo’s shares gained $2.56, almost 12 percent, to close at $23.91 Monday. Microsoft’s stock was up and down, closing the day up a hair.

Microsoft’s strong expression of interest in Yahoo — after months of on-again, off-again negotiations — also calls into question the company’s online strategy.

“All this back and forth, I think, indicates that there’s a lot of confusion internally about where they should be headed,” said Sid Parakh, technology analyst at McAdams Wright Ragen.

Also, should the lengthy, bitter and public struggle ultimately land Yahoo in Microsoft’s hands, the process of combining the two companies could be difficult, he said.

“It’s going to be tough, even if it does play out in Microsoft’s favor. … Longer term it might be a huge issue trying to integrate,” Parakh said.

Benjamin J. Romano: 206-464-2149 or