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According to Reuters, Carl Icahn is, "extremely disappointed with the Yahoo management," after they failed to negotiate a merger with Microsoft. However, he says that the deal they struck with Google "might have some merit."
Icahn owns about 59 million shares of Yahoo and over at Silicon Alley Insider, Henry Blodget believes Icahn's best move is to walk away. Why?

The pact comes with extensive "change of control" provisions that allow Google or Yahoo to terminate the deal in the event that Yahoo is acquired or if a majority of its board is replaced at its upcoming annual shareholders meeting in August.
Thus, if Icahn wins his proxy battle and changes the board of Yahoo, Google has the right to walk away from a deal that Icahn favors as an alternative to an all-out acquisition.
Icahn hinted that the change of control provision might be sufficient reason to pull back on his campaign to replace the Yahoo board. Alternatively, Icahn could accept minority board representation which may not prompt Google to walk away.

So what's next on the horizon for Microsoft and Yahoo? Blodget believes AOL could be the next option. He argues that Yahoo is the better fit for AOL, but of course, Microsoft has much more cash to throw around. So perhaps we go from Microhoo to what? Microaol? Yikes, that has a bad ring to it.
-- by DealBreaker intern and senior Carl Icahn correspondent Travis