HANDICAPPING THE ODDS that Microsoft will buy all or part of Yahoo has become a sucker's bet ever since this corporate melodrama went public back in February. Just take a look at Yahoo's stock chart.

When Carl "Activist Investor" Icahn launched his proxy fight in May, it seemed a foregone conclusion that Yahoo's days operating in its present form were numbered.

It also seemed likely at that time that Icahn had some sort of understanding with Microsoft Chief Executive Steve Ballmer. It was, after all, a huge gamble on Icahn's part, one that was predicated on Redmond actually shelling out about $48 billion for the troubled Internet giant.

But then Microsoft walked away from the negotiating table and Yahoo inked a search outsourcing deal with Google. Suddenly Icahn, while not exactly caught with his pants down, at least looked like his fly was open. His slate of nominees was designed to force a sale of the company, not actually run it.

Maybe it was the all the beer and bratwurst over the long holiday weekend not to mention Yahoo's tumbling share price but it sounds like Icahn and Ballmer had that little talk they probably should have had back in May. According to Icahn, it turns out that Microsoft has no objection to buying some or all of Yahoo, just as long as it doesn't have to deal with the current board or, most importantly, founder Jerry Yang.

Yang's done a remarkable job keeping his baby out of Microsoft's hands, but at a preposterous cost. The company is hemorrhaging executive talent and the stock's become a ping pong ball for arbitrageurs, not a measure of future cash flow or earnings. Oh, and let's not forget the recent "reorganizations," which signal desperation, not rebirth. For retail investors, Yahoo has become a joke.

But the funniest part in this latest act is Icahn's statement that Ballmer has "made it clear to [him]" that he would be interested in discussing a deal with a new board. Meanwhile, Microsoft says it's staying out of the proxy fight. Maybe we're missing something, but aren't these statements contradictory?

To hear Icahn tell it, Microsoft says throw the bums out and we'll talk. As for the ultimate outcome, we're leery of making any more predictions regarding this nightmare, but what the heck. Suffice it to say Yahoo can't prosper on its own and Jerry Yang may have finally run out of lives. Oh, and when the dust settles that pesky Carl Icahn will probably be standing on top of the heap smelling of roses. It wouldn't be the first time.

Also See:

• Google Wins as Microsoft Spurns Yahoo Again

• Yahoo's Ad Biz May Spark Bidding War

• Icahn May Try to Force Yahoo-Microsoft Deal