updated 6/9/2008 4:25:52 PM ET 2008-06-09T20:25:52

Yahoo Inc. and activist investor Carl Icahn delivered another dose of derision Monday in their battle for control of the Internet pioneer's board.

Heralding the formal start of its campaign, Yahoo began mailing materials to shareholders eligible to vote in an Aug. 1 election that will determine whether the company's current directors are re-elected or replaced by a slate of candidates nominated by Icahn.

In a letter to shareholders, Yahoo repeated its belief that Icahn and his fellow candidates aren't qualified to oversee the one of the Internet's best-known franchises.

Meanwhile, Icahn blasted Yahoo's board for allowing the Sunnyvale-based company to be eclipsed by Internet search and advertising leader Google Inc.

"I ask again what your great 'plan' has been over the last few years," Icahn wrote in a letter to Yahoo Chairman Roy Bostock. "Why did you permit Google to leave you in the dust?"

Once the smaller of two companies, Google now makes more money in a couple months than Yahoo does in an entire year.

And while Google's stock price has surged by more than 30 percent since the end of 2005, Yahoo's shares have dropped by more than 30 percent — a decline that probably would be even worse if some investors weren't expecting Microsoft to renew its takeover bid.

Yahoo shares gained 26 cents to $26.70 in late afternoon trading Monday.

Yahoo is urging shareholders to keep its board intact, arguing the stability will enable a management team led by co-founder Jerry Yang to carry out a turnaround plan that is supposed to dramatically accelerate the company's growth during the next two years.

Icahn, a longtime adversary of distressed companies, contends Yahoo's board already has squandered the company's best opportunity by spurning a $47.5 billion takeover offer from Microsoft Corp.'

If he is able to seize the control of the board, Icahn has promised to fire Yang as CEO and try to renew sales talks with Microsoft.

Icahn thinks Yahoo still might be able to work out a deal before the Aug. 1 vote by establishing a firm sales price of $49.5 billion, or $34.375 a share — below the $37 per share that the board sought before Microsoft withdrew its oral offer of $33 per share last month.

Since dropping the takeover bid, Microsoft has said it's no longer interested in buying Yahoo in its entirety. The Redmond, Wash.-based software maker instead has been exploring a more limited deal involving Yahoo's search and advertising operations.

In its Monday letter, Yahoo reiterated its board remains "open to a transaction with Microsoft if it offers our stockholders full and certain value."

Unless Yahoo can work out a deal that appeases him, Icahn has made it clear he intends to relentlessly ridicule the company's board in hopes of rallying support for his attempted mutiny.

Icahn spent much of last week demanding that Yahoo's board rescind an employee severance plan adopted just 12 days after Microsoft's initial Jan. 31 bid to buy the company. The plan, which Yang embraced over the misgivings of outside consultants, could drive up the costs of a Microsoft takeover by more than $2 billion, according to Yahoo documents released last week.

Yahoo has defended the program as an appropriate way to retain and attract employees while the company's fate remains uncertain.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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