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In a letter to Yahoo chairman Roy Bostock, Icahn accused the board of acting "irrationally" when it rejected Microsoft's $47.5 billion offer, before naming the 10 people he seeks to replace them with.

"It is quite obvious that Microsoft's bid of $33 per share is a superior alternative to Yahoo's prospects on a standalone basis," he says in a letter. "I am perplexed by the board's actions. It is irresponsible to hide behind management's more than overly optimistic financial forecasts."

After repeating Microsoft's line about a combined company forming a strong alternative to Google, Icahn

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proceeds: "During the past week, a number of shareholders have asked me to lead a proxy fight to attempt to remove the current board and to establish a new board which would attempt to negotiate a successful merger with Microsoft, something that in my opinion the current board has completely botched."

This assumes, of course, that Microsoft is willing to negotiate on the same terms after withdrawing its offer when Yahoo asked for $5 billion more.

Analysts speculate that Microsoft is now likely to sit back and see what emerges, potentially capitalising on shareholder dissatisfaction at the fact that shares of Yahoo fell below $23 after Microsoft pulled its offer.

Yahoo Chairman Roy Bostock accused Icahn of lacking a complete understanding of the situation: "Unfortunately, your letter reflects a significant misunderstanding of the facts about the Microsoft proposal and the diligence with which our board evaluated and responded to that proposal.

"We do not believe it is in the best interests of Yahoo stockholders to allow you and your hand-picked nominees to take control of Yahoo for the express purpose of trying to force a sale to a formerly interested buyer who has publicly stated that it has moved on."

Icahn's proposal will be put to the shareholders at its meeting on 3 July.