Billionaire investor Carl Icahn today issued an open letter to Yahoo investors urging them to replace the firm's existing board with new executives who would consider a deal with Microsoft.

Icahn described how he has been discussing a possible sale of Yahoo with Microsoft chief executive Steve Ballmer for the past week.

"Steve made it abundantly clear that, due to his experiences with Yahoo during the past several months, he cannot negotiate any transaction with the current board," Icahn stated.

"His logic is simple. If and when a transaction was consummated, Microsoft would be guaranteeing a great deal of capital at closing.

"However, a transaction could take at least nine months and perhaps longer to obtain regulatory clearance in the US, Europe and elsewhere.

"During that period, if the current board and management team of Yahoo mismanage the company (and their recent track record is far from reassuring), Microsoft would be putting its money at risk and a great deal could be lost."

In a parallel announcement today Microsoft said that, if a new board were to be elected, it would still discuss purchasing Yahoo outright or stripping off the firm's search business.

"Steve made it clear to me that if a new board were elected, he would be interested in discussing a major transaction with Yahoo, such as either a transaction to purchase the 'Search' function with large financial guarantees or purchasing the whole company," Icahn added.

"He stated that Microsoft would be willing to enter into discussion immediately if the new board that has been nominated were elected.

"While there can be no assurance of a future transaction, as many of you know, I have negotiated successfully a large number of transactions over the past years.

"If and when elected, I strongly believe that in very short order the new board would, subject to its fiduciary duties, be presenting to shareholders either a purchase offer for the whole company or a very attractive offer to purchase 'Search' with large guarantees."

Icahn went on to accuse the current Yahoo board of conducting "botched up" negotiations with Microsoft over the past months.

"There is no need to keep pointing out the mistakes I believe Yahoo made by not immediately taking a $33 offer made by Microsoft," he said.

"But one thing is clear: Jerry Yang and the current board of Yahoo will not be able to 'botch up' a negotiation with Microsoft again, simply because they will not have the opportunity."

According to Icahn Yahoo is "now moving toward a precipice" as it is currently losing web search market share.