Yahoo CEO Jerry Yang has written two letters in response to Carl Icahn's attempt to take over Yahoo's board. One addresses Yahoo employees and the other its senior management. Neither feature capitalization. Both suggest Carl Icahn's move to take over Yahoo's board "reflects a significant misunderstanding of the facts," which as Yang see's them are that he and Yahoo's board responded to Microsoft CEO Steve Ballmer's merger proposal with "diligence" as well as "knowledge, experience and commitment." Funny how Yahoo's largest shareholders seem to disagree. Both of Yang's letters are copied below.

Roy Bostock, Yahoo's chairman of the board, has responded to corporate raider Carl Icahn. The one-word version: "Unfortunately." That word sums up so well the letter, Yahoo's hamhanded reply to Icahn, and the whole sorry mess. Bostock has a point: There has not been a written offer on the table since Yahoo rejected Microsoft in February, and so neither the current board nor Icahn's replacements have any proposed sale to consider.

For Carl Icahn to earn a quick profit on Yahoo, snatching up 3.5 percent of the company at around $25 a share and then selling to Microsoft at $33, Microsoft executives have to play along. So far they aren't doing so. They've told Icahn they have "moved on" and do not plan to reconsider a Yahoo merger. Meanwhile, sources familiar with the matter — we're guessing Googlers eager to see Icahn's effort kiboshed — tell the Wall Street Journal that a Google-Yahoo search advertising deal, the one that drove Microsoft CEO Steve Ballmer from the negotiating table in the first place, is now "more likely than not."

Money isn't everything. Mark Zuckerberg may have the highest net worth among his generation of entrepreneurs, but the Facebook CEO only gets 21 out of 294 pages in Sarah Lacy's new Web 2.0 book, Once You're Lucky, Twice You're Good. That's 16 more than his sister, nerd chanteuse Randi Jayne Zuckerberg, which tells us Lacy has her priorities all wrong. The Zuckerbergs' index page:

After acquiring 3.5 percent of Yahoo in the week after merger negotiations fell through with Microsoft, corporate raider Carl Icahn will move forward with a plan to replace the company's board with directors expected to be friendly to resuming negotiations. Icahn could announce the alternative slate as early as tonight, Reuters reports, citing sources familiar with the matter. Which means the Wall Street Journal could run a widely expected hit piece on Yahoo CEO Jerry Yang as soon as tomorrow.

Sending angry letters, going public with a hostile offer — Microsoft CEO Steve Ballmer played rough with Yahoo CEO Jerry Yang and the Yahoo board during merger negotiations. Yahoo shareholders, dispirited by the failure of those negotiations, want corporate raider Carl Icahn to play rougher. Icahn purchased $1.3 billion worth of Yahoo only after large Yahoo shareholders contacted him and urged him to become involved, a source familiar with the matter told the Wall Street Journal. The man controlling the second largest portion of Yahoo shares, portfolio manager Bill Miller of Legg Mason, told the Journal he's glad Icahn joined the fray. "To the extent he can get the parties back to the table I'd be all in favor of that," Miller said. (Photo by AP/Mark Lennihan)

Yahoo might merge with Microsoft whether the CEOs of either company like it or not. Since the merger fell apart last week, corporate raider Carl Icahn has purchased as many as 50 million shares in the company and now he's "leaning toward launching a proxy contest in an effort to push Yahoo back to the negotiating table," a person familiar with the matter told the Wall Street Journal. Microsoft sources say they have not given Icahn assurance that the company will purchase Yahoo, even at a more favorable price. In 2007, Icahn purchased 8.5 percent of BEA Systems, not long before the company first rejected and then agreed to a merger with Oracle.

Yahoo shareholders have asked Microsoft's former nominees for the Yahoo board to consider joining a new alternative slate for Yahoo's annual shareholder meeting on July 3. But Thursday's nomination deadline makes it unlikely that CEO Jerry Yang and the board will face a proxy fight for control over the company. Instead, Yang and his fellow directors are likely to get new lawsuits — in addition to the 10 already filed. Angry shareholders "should contact us. We are trying to represent them," Mark Lebovitch, a partner at law firm Bernstein Litowitz Berger & Grossmann LLP, told the Sydney Morning Herald. "If there are large shareholders who want to express to the board the view that they failed in their duties, we are the people to call." Gee, what's wrong with email?

Yahoo shares are hovering around $25 because investors hope major Yahoo shareholders can still force a deal with Microsoft at $33 per share or more. But at Google's annual shareholder meeting yesterday, cofounder Sergey Brin and CEO Eric Schmidt tried their best to destroy those hopes, amping up talk of a deal that would outsource Yahoo's search advertising to Google and make Yahoo unattractive to Microsoft. Brin said the deal is designed to keep Microsoft at bay. "[Yahoo was] under a hostile attack and we wanted to make sure they had as many options as possible," Brin said.

Yahoo will hold its annual shareholders' meeting on July 3. Investors angry over how Yahoo CEO Jerry Yang the Yahoo board handled merger negotiations with Microsoft — paging Gordon Crawford and Bill Miller — have until next Thursday to do so by submitting an alternate slate of directors to replace the current board. Wall Street analysts don't expect it to happen, reports the Financial Times. Activist shareholder Eric Jackson, the president of Ironfire Capital, isn't listening to them, however.

Yahoo CEO Jerry Yang has not been replaced by chairman Roy Bostock, Kara Swisher reports. Yang's reputation, however, has taken a severe tarnishing. How far has his reputation fallen?

Jerry Yang's spin campaign about why the Microsoft bid fell through is transparent. He's not trying to cajole Steve Ballmer back to the negotiating table; he's trying to cover his rear and appease indignant shareholders. The only reason he's so open about accepting a new bid from Microsoft, I think, is that he's not expecting another one to come. Ballmer has more or less said he thinks that Yahoo is worth less and less every day; last Saturday, when Yang flew up with cofounder David Filo to meet with Ballmer one last time, was as close as the two will ever get to agreeing on Yahoo's worth. The thing is, unless Yang makes some dramatic shifts, Ballmer may well be right.

Suddenly, Yahoo CEO Jerry Yang is telling reporters he's "willing to listen" to Microsoft offers below $37 a share. Why the change of heart? Because Yang had a bad day Monday. Major Yahoo shareholders slammed him in the press. Employees were angry and the Yahoo board took heat, too. "I'm extremely disappointed in Jerry Yang," Capital Research Global Investors portfolio manager Gordon Crawford told the Wall Street Journal. "I think he overplayed a weak hand." Crawford also directed his ire at Yahoo's board of directors: "The independent directors were not responsive to the needs of independent shareholders." A very tenuous source tells us at least one Yahoo board member got the message and was heard venting over the phone about Yang's performance, saying, "I'm done with this ego trip shit, he's out."

According to the New York Times, when Yahoo CEO Jerry Yang and his team were told that Microsoft was walking away from its $47.5 billion offer to buy the company "high-fives were exchanged." Today, analysts expect Yahoo's value to plummet to $30 billion. Gimme an O! Gimme an O! Gimme a P! Gimme an S! — Yahoo employees, many of them suddenly poorer, told Kara Swisher they want Yang back on the sidelines where such cheerleading belongs. Yang's high-five display "shows a complete lack of connection to the balance of the company," one Yahoo exec told Swisher. Another told her:

Even when Microsoft CEO Steve Ballmer tries to sound polite, he manages to be rude. His thank-you-very-much letter to Yahoo's Jerry Yang declining to make an offer for Yahoo is no exception. In particular, Ballmer rails against Yang for considering outsourcing search advertising to Google, saying it will cause Yahoo's engineers to flee and raise prices for advertisers. "By failing to reach an agreement with us, you and your stockholders have left significant value on the table," Ballmer concludes. If I were Yang, I would read this and wonder why I ever even contemplated getting into business with this guy. The full letter:

Microsoft CEO Steve Ballmer heeded our advice and walked away from a bid for Yahoo. Did he dodge a potentially career-ending bullet? "The talks broke down this afternoon after a face to face meeting in the Seattle area that included Microsoft CEO Steve ballmer, Microsoft exec. kevin johnson, and Yahoo co-founders Jerry Yang and David Filo." [All Things Digital] (Photo by Yodel Anecdotal)

As soon as Microsoft CEO Steve Ballmer makes his next move, Yahoo could announce a plan to serve Google ads against Yahoo search results, the Wall Street Journal reports. Yahoo and Google tested such an arrangement in April and it went well enough that Yahoo CEO Jerry Yang believes a longer term deal will appease shareholders enough to keep Yahoo independent.

The California State Controller's Office shows that Microsoft owes Yahoo CEO Jerry Yang $3,008.46 in unclaimed dividend checks. The software giant has apparently been mailing the checks to Santa Cruz instead of a Yahoo office in Santa Clara. Is that why Yahoo hasn't yet responded to Microsoft's bid? [Forbes]

Yahoos David Filo, Jerry Yang, Sue Decker and Blake Jorgensen watching All Hands, the Movie last week. Suggest your caption in the comments; the best will become the new headline. Yesterday's winner: WagCurious, for "Don't smell evil." (Photo byYodel Anecdotal)

Yes, the leaked copy of Yahoo's All Hands, the Movie we received this afternoon features a scene where Trent Herren of international operations discovers client strategist Ian Kennish is a Valleywag leaker. But leave it to the folks in Sunnyvale to think we have some special, complicated web site for leaks — when really, all you have to do is send us an email. Full video, including infrastructure EVP Ash Patel cleaning the cube of incredibly messy co-founder David Filo, after the jump.