Yahoo confirmed today that it has rejected a joint proposal from Microsoft and Carl Icahn for a complex restructuring of the Internet company that would include the acquisition of Yahoo's search business by Microsoft.

This is just the latest episode in the bidding war unleashed by Microsoft against Yahoo. the joint proposal was made on Friday, but Yahoo ruled that accepting the proposal is not in the best interests of its stockholders.

Yahoo said there are four factors based on which the joint proposal was ruled out.

Yahoo’s existing business plus its recently signed commercial agreement with Google has superior financial value and less complexity and risk than the Microsoft/Icahn proposal and

the Microsoft/Icahn proposal would preclude a potential sale of all of Yahoo for a full and fair price, including a control premium.

Also, the major component of the overall value per share asserted by Microsoft/Icahn would be in Yahoo’s remaining non-search businesses which would be overseen by Mr. Icahn’s slate of directors, which has virtually no working knowledge of Yahoo’s businesses.

“This odd and opportunistic alliance of Microsoft and Carl Icahn has anything but the interests of Yahoo!'s stockholders in mind. Clearly, Microsoft, having failed to advance in search, is aligning with the short-term objectives of Mr. Icahn to coerce Yahoo! into selling its core strategic search assets on terms that are highly advantageous to Microsoft, but disadvantageous to Yahoo! stockholders”, said Roy Bostock, Chairman of Yahoo.

Ironically, Carl Icahn, who jointly with Microsoft developed and presented this proposal, had previously urged Yahoo! not to sell its search business to Microsoft.

Specifically, in an interview on CNBC's Fast Money program, on June 4, 2008, Mr. Icahn said, “... it's crazy for this company now to do this alternative deal and give the store away, because obviously, an alternative deal is a poison pill because once you've done an alternative deal and given the search to Microsoft, you don't need Microsoft to buy you anymore. So, that would be a poison pill….”

Still, Yahoo Board acknowledged that the current proposal contains a number of improvements over Microsoft’s earlier proposal.