YAHOO'S

Microsoft

And Chief Executive Jerry Yang is in a lot of trouble.

Icahn is simply too good and too shrewd at what he does, which, in addition to making a lot of money, is rocking companies at their cores. History suggests that he will turn Yahoo's comfy, if slightly delusional, world upside down. And Icahn needn't have a commitment from Microsoft to bid again to do it though that seems preferable, and possibly key, to his gambit. It's a great risk, but then that's part of what makes great dealmakers great. Brinksmanship, nerves of steel, and secret Plans B, C and D that we can only speculate about.

Some quick hits from Icahn's recent, relentless history include Oracle's acquisition of BEA Systems. BEA wanted no part of it, but Icahn snapped up some BEA shares and the shotgun marriage was consummated. A few months ago Icahn was instrumental in making Motorola split off its handset business. And a few weeks ago he emerged as a key figure in Blockbuster's bid for Circuit City Stores. When does the guy sleep?

Whatever Icahn does, he figures to have plenty of support from other restive investors. Major shareholders such as Legg Mason and Capital Research and Management were none too happy with Yahoo after Microsoft stalked off, taking some $47 billion with it. In a remarkable moment of candor, Capital Research and Management's Gordon Crawford made his feelings known by offering up this quote: "I am extremely angry at Jerry Yang."

So Icahn shouldn't have too much trouble lining up support for a full or partial slate of directors, all of whom will be exerting extreme pressure on Yang. Whether it's pressure for a sale or wholesale change remains to be seen.

A lot of that depends on whether Microsoft is still interested. The folks in Redmond have said they've moved on. They've got other plans, other strategies and other relationships to pursue. Maybe Microsoft does; maybe that's just posturing. Perhaps it's a little of both. Unrequited love makes it hard for people to know their own minds. But remember that Microsoft's problems remain the same: It needs to deploy its billions of dollars in cash to create sustainable businesses for future growth. And that growth is online.

We said repeatedly that a Microsoft acquisition of Yahoo is a bad idea. But then again CEO Steve Ballmer, despite the fact that even when he's smiling looks like he has a barely-contained appetite for human flesh, is no dummy. He's rich, smart and successful, so maybe he's right. Or maybe Microsoft just doesn't have a lot of options.

Thursday's deadline to nominate directors to Yahoo's board will be a tense and interesting time for everyone involved, but it's only the preface to what is rapidly becoming an epic novel, possibly and unfortunately of the school of magical realism. We don't know the long middle of this story but the end seems almost inevitable. One way or another, the Yahoo of old is done for.

Also See:

• After Yahoo Microsoft Eyes Facebook, Others

• Yahoo May Find Victory in Microsoft Deal's Defeat

• Microsoft Shareholders to Pay High Price for Yahoo