Huh? This theory makes no sense. MS made the offer to Yahoo before Icahn started buying. He bought once the Yahoo board declined the offer. It doesn’t take any sort of special knowledge or collusion to decide that that the rest of the Yahoo shareholders might want to take a 72% premium over their shares that was MS’s original offer. A proxy fight in that sort of situation, when Yahoo’s board has turned down such a massive offer, is a trivially easy thing to think of without any involvement on MS’s part. What it does take is a some knowledge and experience in mounting proxy fights, a willingness to do so, and a lot of cash to sink into buying enough to wage one effectively.

He doesn’t need MSFT paying him directly to make a killing on this. All he needs is for shares that he bought in the twenties, along with the rest of Yahoo, for the $33/share that has already been offered. YHOO is trading below $28 *right now*, even with lots of speculation that he’ll succeed.

“The software giant’s move to court Yahoo was likely to prompt the Icahn to press Yahoo to further pursue an alliance with Google, a person familiar with the billionaire investor’s thinking told Reuters on Sunday.”

That’s not what you would call a “MSFT put Icahn upto mischief” view. Not debating here – just counterpoints of people who have watched the Icahn raids over the years!

1) MS has already returned to the table 5 days after saying they would move on and go another direction.

2) MS includes the following statement in the new non-merger talks:

“Microsoft is not proposing to make a new bid to acquire all of Yahoo at this time, but reserves the right to reconsider that alternative depending on future developments and discussions that may take place with Yahoo or discussions with shareholders of Yahoo or Microsoft or with other third parties,” the company said in its statement.”

3) Ichan sinks over a billion dollars into Yahoo!, a company that has tremendous risk associated with it without MS. Ichan’s stock purchases without insider knowledge that MS will buy Yahoo! is highly questionable.

IMO, this is Microsoft’s easiest and cheapest way to wage a hostile takeover. “Hire” Ichan.