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In a letter to Yahoo shareholders, corporate raider Carl Icahn writes that he's never seen a company "distort, omit and twist" facts quite the way Yahoo did in a statement the company released Saturday night. Yahoo said it had rejected Microsoft's latest offer to buy Yahoo's search business. In the statement, Yahoo said Microsoft made an ultimatum and gave Yahoo only 24 hours to accept or reject the deal. Naturally, Microsoft agrees with Icahn's assement. In a release titled "Microsoft Sets the Record Straight," Microsoft says that it only proposed a new search deal after Yahoo chairman Roy Bostock called Microsoft CEO Steve Ballmer and asked for one. Microsoft says it worked a proposal up by late Friday and sent it, asking Yahoo to confirm in 24 hours whether or not the proposal was "sufficient to form the basis for the parties to engage in negotiations over the weekend on a letter of intent and more detailed term sheets." "This discussion," reads Microsoft's statement, "has been mischaracterized as a take it or leave it ultimatum, rather than a timetable in order to move forward to intensive negotiations." Yeah, we're lost, too. Microsoft's full statement, below.

Microsoft Sets the Record Straight

REDMOND, Wash. – July 14, 2008 - On the evening of July 12, Yahoo! Inc. released a statement relating to recent discussions involving Yahoo!, Microsoft Corporation, and Carl Icahn. Microsoft believes the statement contains inaccuracies that need to be corrected. Among other things, the enhanced proposal for an alternate search transaction that we submitted late Friday was submitted at the request of Yahoo! Chairman Roy Bostock as a result of apparent attempts by Mr. Icahn to have Microsoft and Yahoo! engage on a search transaction on terms Mr. Icahn believed Microsoft would be willing to accept and which Microsoft understands Mr. Icahn had discussed with Yahoo!.

Specifically, on Thursday afternoon, July 10, Mr. Bostock called Steve Ballmer’s office to arrange a call. On that subsequent call, Mr. Bostock told Mr. Ballmer that “with substantial guarantees on the table and an increase in the TAC (traffic acquisition cost) rate, there are the pillars of a search only deal to be done.” Mr. Bostock encouraged Mr. Ballmer to submit a new proposal to Yahoo! for a search only deal reflecting these terms.

After considering Yahoo’s request and taking into account Yahoo’s previous feedback about our prior search proposal, Microsoft determined late Friday to propose an enhanced search transaction. This proposal included significant revenue guarantees, higher TAC rates, an equity investment and an option for Yahoo! to extend the agreement over a 10 year period.
Microsoft’s proposal did not include changes to Yahoo’s governance.

At the time Microsoft submitted its enhanced proposal, Microsoft asked that Yahoo! confirm whether it would agree that the enhancements were sufficient to form the basis for the parties to engage in negotiations over the weekend on a letter of intent and more detailed term sheets. This discussion has been mischaracterized as a take it or leave it ultimatum, rather than a timetable in order to move forward to intensive negotiations. Yahoo! informed Microsoft on Saturday that it had rejected the proposal.