Microsoft said tonight it would be willing to reopen talks to buy all or part of Yahoo, but only if a new Yahoo board is elected.
Microsoft, which broke off months-long talks in early May to buy the Internet company for $47.5 billion, said it would resume talks immediately if a new board were elected at Yahoo's August 1st stockholder meeting. Yahoo shares leapt 12 per cent.
The Microsoft statement came after Icahn, a billionaire who owns more than 4 per cent of Yahoo, issued an open letter saying he had "spoken frequently" to Microsoft chief executive Steve Ballmer over the last week. Previously, the two had not spoken.
"This is the first concrete confirmation we have that Microsoft is willing to come back to the table," UBS analyst Ben Schachter said. "It gives Icahn a much stronger hand going into the shareholder vote. It significantly raises his profile and his likelihood for success."
Mr Ballmer said that a big impediment to any Yahoo deal was his concern that the current board could "mismanage" the company while the deal awaits regulatory approval, a process that could take nine months or more, according to Icahn.