Yahoo still talking to Microsoft

By Michele Gershberg and Paul Thomasch

NEW YORK (Reuters) - Yahoo Inc (YHOO.O) said on Wednesday that talks were still on with Microsoft Corp (MSFT.O) and trumpeted new advertising deals, but it failed to appease critic Carl Icahn who called its board's moves "deceitful."

Yahoo President Susan Decker unveiled new ad partnerships with Wal-Mart Stores (WMT.N) and others as Icahn, a billionaire activist investor, stepped up pressure on Yahoo over its rebuff of Microsoft's $47.5 billion (24.3 billion pounds) buyout offer.

And she said that some form of deal with Microsoft could still come about, sending Yahoo shares up 2.7 percent for the day, despite Icahn's later blistering, personal attack on Chief Executive Jerry Yang's leadership at Yahoo.

In an invective-filled letter to Yahoo, Icahn used terms like "deceitful," "self-destructive," "misleading" and "insulting to shareholders" for moves by Yang and the board to retain employees in a severance plan likely to make a deal with Microsoft more costly.

He called on Yahoo to rescind anti-takeover defences and merge with Microsoft, writing that "even I am amazed at the length Jerry Yang and the Yahoo board have gone to in order to entrench their positions and keep shareholders from deciding if they wished to sell to Microsoft."

Icahn has proposed an alternate board ahead of Yahoo's annual meeting on August 1. He told cable business channel CNBC later on Wednesday that "we have good odds" in the Yahoo proxy battle and said an alternate deal in which Microsoft would buy only parts of the company would not serve shareholders.

Decker told the Advertising 2.0 conference in New York that a deal could happen in many forms. "There are ongoing, engaged conversations," she said. "There are many ways in which a combination with Microsoft could be very beneficial."

But some Wall Street investors say Icahn cannot be easily denied. "Carl is a very, very tough adversary to have. They (Yahoo) should have taken him more seriously in the beginning," bankruptcy specialist Wilbur Ross told Fox Business News.