In a presentation to shareholders released to regulators yesterday, Yahoo! gave a detailed account of the company's recent acquisition talks with Microsoft, saying there were doubts about its commitment to buying the whole company.
The company also claimed Microsoft had been "unresponsive and inconsistent" during talks, failing to respond to requests from Yahoo! for more information.
Yahoo! was responding to a letter to shareholders sent by Icahn last Thursday calling for chief executive Jerry Yang to be replaced and for a public offer to sell the company to Microsoft.
Icahn, who has built up a 5% share in Yahoo!, also said his alternative board, if elected, would consider scrapping a worker compensation plan in the event of a change in control.
Yahoo! said yesterday that Icahn's proposals would destabilise the company and rejected his call for Yang to step down. Yang was "a key driver and facilitator of our strategic plan", the company said.
In the presentation, Yahoo! cast doubt on Icahn's investment history, noting that only three of the 15 companies he currently has a stake in have seen an increase in stock value since his involvement.
According to Yahoo!, during talks Microsoft offered an alternative to buy Yahoo!'s search business only.
The deal was left on the table by Microsoft after talks for a full sale officially ended last month.
The proposal would see Microsoft pay $1bn upfront and an additional $8bn in exchange for exclusive control over Yahoo!'s search business for the next ten years.
The company said that Microsoft's proposal "did not make sense for Yahoo either financially or strategically".
Yahoo has suffered an exodus of senior staff in recent weeks, leading it to announce a major reorganisation of the business last week. Its shares were down 3.1% to $20.66 at the close yesterday.
Shareholders will decide the fate of the board at the annual meeting on August 1st.