Microsoft yesterday moved to "set the record straight" over the latest round of fighting in its bitter takeover battle for Yahoo.

The response was sparked by Yahoo's release on 12 July of a statement relating to the latest discussions involving itself, Microsoft and investor Carl Icahn.

"Microsoft believes the statement contains inaccuracies that need to be corrected," the software firm stated.

"Among other things, the enhanced proposal for an alternative 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."

According to Microsoft, Bostock called Steve Ballmer's office on 10 July to arrange a call.

On the subsequent call, the Yahoo chairman said that "with substantial guarantees on the table and an increase in the traffic acquisition cost rate, there are the pillars of a search only deal to be done".

Microsoft added that Bostock encouraged 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," Microsoft stated.

"This proposal included significant revenue guarantees, higher traffic acquisition cost 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 mischaracterised 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."