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Microsoft, which broke off talks in early May to buy the internet company for $47.5 billion, says it would resume discussions immediately if a new board were elected at Yahoo's 1 August stockholder meeting, providing a a major boost for investor Carl Icahn's board slate.

The Microsoft statement comes after Icahn, the billionaire financier who holds over 4% of Yahoo, issued his own statement claiming he had "spoken frequently" to Microsoft CEO Steve Ballmer over the past week. Previously, the two had not spoken.

Ballmer told Icahn that a big impediment to any Yahoo deal was his concern that the current board could "mismanage" the company while the deal awaits regulatory approval, a process that could take nine months or more, according to Icahn.

Icahn claims his proposed dissident board slate would make Microsoft feel more secure in risking a large sum of capital to complete the deal during the regulatory approval process.

"You don't have to be Sherlock Holmes to realise there is no great comfort zone between the current Yahoo board and Microsoft," says Icahn. "During this waiting period for regulatory approval, any acquirer - not just Microsoft - would want a steward they would feel comfortable with."

In an open letter, Icahn claims

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the Yahoo board is the major impediment to any Microsoft deal.

In response, Yahoo has issued a statement saying it continues to be willing to reopen talks with Microsoft, but "we feel strongly" that any deal negotiated between Icahn and Microsoft "would not lead to an outcome that would be in the best interests of Yahoo stockholders."

Icahn also says he is actively interviewing replacements for Yahoo CEO Jerry Yang and its management team. "I am moving towards getting a potential new management team for Yahoo including a new CEO," he claims.

Stock lift

The long-awaited signals that the Microsoft-Yahoo talks could be revived sent Yahoo stock up more than 10% in early trade on Monday.

Sanford C. Bernstein senior internet analyst, Jeffrey Lindsay, says that if Microsoft is serious about resuming talks, "there is rationale for voting for the Icahn slate and essentially ousting the current Yahoo board and probably the management, too."

"At the end of the day, you would have to expect that the big institutional shareholders would go for a deal with Microsoft," says Lindsay.

Talks between Yahoo and Microsoft broke down in early May. Microsoft originally offered $31 per share and raised it to $33, but Yahoo demanded $37 per share.

After talks collapsed, Icahn amassed a stake in Yahoo and launched a proxy war to replace the Yahoo board and management, claiming they "botched" the Microsoft talks.

In his letter Icahn states: "Steve made it clear to me that if a new board were elected, he would be interested in discussing a major transaction with Yahoo," including purchasing either its "search" function with large financial guarantees, or an outright purchase of Yahoo.

Microsoft claims it would be premature to discuss details, such as the price it might offer for Yahoo.