Redmond, Wash.-based Microsoft walked away May 3 from its offer to buy the Web pioneer. Since then, billionaire investor.
In a statement Sunday, Microsoft says it is considering a different kind of deal with Yahoo as it pursues ways to improve and expand its online services and advertising business.
"Microsoft is considering and has raised with Yahoo an alternative that would involve a transaction with Yahoo but not an acquisition of all of Yahoo," the statement said. "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."
A Microsoft spokesman declined to comment beyond the written statement. Yahoo representatives could not immediately be reached for comment.
The statement may be a sign that Yahoo founders Jerry Yang and David Filo and Chairman Roy Bostock are scrambling to avert an ugly shareholder mutiny ahead of the company's July 3 annual meeting.
Icahn has proposed his own slate of directors to replace Yang, Bostock and the rest of the board, in hopes of bringing Microsoft back to the bargaining table. The results of his effort would come to a vote at the meeting.
Many analysts believe that despite Microsoft's assurances it is moving ahead without Yahoo, the software maker would revive its bid, likely at a lower price, if the Silicon Valley icon's stock continues to languish.
Icahn told Yahoo's board it could quickly quell the shareholder revolt by renewing negotiations with Microsoft, but the software maker warned Sunday that it's possible no deal will be struck.