"Yahoo!'s Board of Directors continues to stand ready to enter into negotiations with Microsoft Corporation for an acquisition of Yahoo!. Indeed, as recently as June, Yahoo!'s independent directors and management approached Steve Ballmer about just such a transaction, only to be told that Microsoft was no longer interested even in the price range which they had previously proposed," Yahoo said in a statement.

Icahn, in his letter to shareholders this morning, explained that Microsoft CEO Steve Ballmer doesn't trust Yahoo's current management and board to get a deal through the months of regulatory review any transaction would require.

Still, Yahoo is ready to deal now and hinted that waiting till later -- like, say, after Aug. 1. when the makeup of the Yahoo board could be decidedly Icahnesque and a search-only deal could be hashed out with Microsoft -- "would not lead to an outcome that would be in the best interests of Yahoo!'s stockholders."

The Yahoo missive concluded:

"If Microsoft and Mr. Ballmer really want to purchase Yahoo!, we again invite them to make a proposal immediately. And if Mr. Icahn has an actual plan for Yahoo! beyond hoping that Microsoft might actually consummate a deal which they have repeatedly walked away from, we would be very interested in hearing it."

That seems a bit odd compared with the company's 32-page shareholder presentation last week. In response to weeks of withering Icahn attacks, Yahoo argued that shareholders should give the company's board and management a chance to show that rejecting Microsoft was the right choice.

By early-afternoon trading today, Microsoft shares -- and all three major indexes -- had swung back into the red, down 24 cents, or less than a percent, to $25.74. Yahoo, meanwhile, continued to fly, up $2.46, 11.5 percent, to $23.81.