Now Yang might have only a few weeks to persuade Microsoft to revive its offer of $47.5 billion, or risk being fired in a shareholder mutiny led by activist investor Carl Icahn.

Spurred on by other outraged shareholders, Icahn notified Yahoo on Thursday that he will lead a revolt to oust Yang and the rest of the Internet company's board unless they renew negotiations with Microsoft. Discussion of selling Yahoo to Microsoft fell apart May 3 when the two sides couldn't agree on a price.

To pressure Yahoo, Icahn has nominated an alternate slate of directors to replace the current board in an election July 3 at Yahoo's annual meeting. If the uprising is successful, an Icahn-led board presumably would fire Yang as CEO and try to negotiate a sale to Microsoft.

To gain leverage in the looming battle, Icahn revealed that he has spent more than $1 billion snapping up 59 million Yahoo shares and options to give him a 4.3 percent stake in the Sunnyvale, Calif.-based company. He plans to seek approval from the Federal Trade Commission to acquire up to $2.5 billion in Yahoo stock, including his current holdings.

Icahn's challenge opens a new chapter in a saga that began Jan. 31, when Microsoft stunned Yahoo with a takeover bid that started out at $44.6 billion, or $31 per share, and then rose to $47.5 billion, or $33 per share, this month.

The showdown features at least five billionaires with diverse agendas:

* Yang and fellow Yahoo co-founder David Filo, who think Yahoo is worth at least $53 billion.

* Icahn and basketball team owner Mark Cuban, who agreed to help shake up the company that made him rich.

* Microsoft CEO Steve Ballmer, who, until recently at least, viewed Yahoo as a key weapon in his fight to topple Internet search and advertising leader Google.

Hoping to seal the deal, Ballmer orally offered to buy Yahoo at $33 per share. But Yang and Filo -- on behalf of Yahoo's board -- sought $37 per share, a price the stock hasn't reached in more than two years. The impasse led Ballmer to withdraw the bid.

In his letter to Yahoo chairman Roy Bostock, Icahn criticized the board's actions as "unconscionable," given that Yahoo's stock stood at $19.18 before Microsoft made its bid. He urged the board to reopen talks.

"I believe that a combination between Microsoft and Yahoo is by far the most sensible path for both companies," Icahn wrote.

A Yahoo representative said the company would respond to Icahn soon.

Yahoo shares rose 61 cents, or 2.3 percent, to finish at $27.75, the stock's highest closing price since Microsoft broke off talks.

Though Icahn made it clear that he wants Yahoo to be sold to Microsoft, there are no guarantees that Microsoft is still interested.

A Microsoft spokesman declined to comment on Icahn's letter.

Possible Yahoo suitors

Besides Icahn, the alternate slate of nominees includes Cuban, who sold Broadcast.com to Yahoo for $8.1 billion in stock in 1999. In a February blog posting, he urged Yahoo to sell to Microsoft.

Icahn recruited two nominees that Microsoft reportedly lined up for a possible hostile takeover attempt that never materialized: advertising executive Edward Grey and former Nextel Partners CEO John Chapple.

If Yahoo can't placate Icahn, the battle threatens to distract the company's management from its turnaround efforts, said James Post, a Boston University professor specializing in corporate governance and ethics.

"Senior management cannot concentrate on managing the business when they are concentrating on managing critical relationships with angry shareholders," Post said.

Investors are angry

And there's no doubt Yahoo shareholders are furious, said Darren Chervitz, a portfolio manager at Jacob Internet Fund, which owns about 100,000 Yahoo shares.

"There's a strong feeling that Yang and the board did not do their fiduciary duty," Chervitz said. "They had a very strong offer on the table and did everything to brush it aside, if not sabotage it."

The revolt threatens to jettison Yang, 39, from the company that he started with Filo, 41, while they were graduate students at Stanford University 14 years ago.

Together, Yang and Filo own 134 million Yahoo shares, or nearly 10 percent of the company.

Yang has argued that Yahoo will be worth more than Microsoft's last offer -- if Yahoo can expand its share of a rapidly growing Internet advertising market. Yang has pledged to boost Yahoo's net revenue growth by 25 percent in 2009 and 2010 -- well above its recent pace of 12 percent.

"It is irresponsible to hide behind management's more than overly optimistic financial forecasts," Icahn wrote.