Yahoo! Sends Letter to Stockholders Urging Support for Its Current Board

Says Icahn/Microsoft Agenda Not In Best Interests of Yahoo!

Stockholders

SUNNYVALE, Calif.–(EMWNews)–Yahoo! Inc. (Nasdaq:YHOO), a leading global Internet company, today sent

the following letter to all stockholders from Chairman Roy Bostock and

CEO Jerry Yang:

Dear Fellow Stockholder:

The recently-formed Carl Icahn-Microsoft alliance continues to make

misleading statements about their plans for Yahoo!. Your Board of

Directors believes strongly that the Icahn-Microsoft agenda –as

presented to us jointly last week – will

destroy stockholder value at Yahoo!, serving only their very

narrow special interests, clearly not your interests.

Your Board continues to work to maximize value for you and is taking the

following steps to do so:

• Moving forward with our strategic plan and strategies to lead in

  online advertising – with both search and

  display;

• Preparing to implement our recently signed commercial agreement with

  Google that will increase cash flow;

• Continuing to explore other ways to unlock value and return value to

  you such as unlocking the value of our Asia assets; and

• Remaining open to negotiating a value creating transaction (including

  with Microsoft) that provides real and certain value –

  not just the possibility of

  value.

In contrast, let’s review Carl Icahn’s

brief involvement with the Company to date.

Carl Icahn bought his stock two months ago for an estimated average

cost of less than $25 per share. He is well-known as a corporate

agitator with a short-term approach to his investments. His

short-term approach gives Mr. Icahn a strong incentive to strike any

deal with Microsoft that enables him to recover his investment and get

back his money quickly, even a deal that does not provide full and fair

value to you. Is that in the interests of all stockholders? Clearly, it

is not.

Mr. Icahn has severely handicapped himself in his ability to

negotiate a favorable transaction with Microsoft. Why?

• Mr. Icahn has made it clear that his only objective is to sell part or

  all of Yahoo! to Microsoft. That fact, combined with his lack of an

  operating plan going forward, means

  that he will have no leverage to negotiate a fair deal with

  Microsoft. He has set himself up for failure.

• Second, Mr. Icahn and his slate lack

  the working knowledge of Yahoo! and its Internet business

  needed to do two things that are required to successfully deliver a

  value-enhancing transaction for Yahoo! stockholders. First, they do

  not have the detailed knowledge to negotiate a complex restructuring

  of a large, innovative high technology company in a rapidly changing

  environment. Second, they do not have the hands-on experience to

  manage and lead Yahoo! during the approximately one year period

  estimated to be required to gain regulatory approval for a deal or to

  manage and lead the remainder of the Company (non-search) after a

  transaction is completed. Don’t take our

  word for that. Mr. Icahn will be calling the shots if his slate wins

  and yet Mr. Icahn himself told the Wall Street Journal last

  fall: “Technology hasn’t

  really been one of the things I’ve focused

  on too much before” and “It’s

  hard to understand these technology companies.”

  That’s why you need a knowledgeable,

  experienced and independent board to represent your interests

  vis-a-vis Microsoft.

Mr. Icahn can’t make up his mind about

what he thinks will work for Yahoo!. He bought his position

believing that he could bring Microsoft back to buy all of Yahoo!, at

one point suggesting we publicly offer to sell Yahoo! to Microsoft for

$34.375. But he didn’t do enough due

diligence to determine what your Board already knew: that it was

Microsoft’s decision to walk away

and that it had rebuffed repeated efforts by your independent directors

to get a whole company acquisition back on the table. Recognizing that a

sale to Microsoft might not be an option, Mr. Icahn said as an

alternative that we should enter into an

agreement with Google (which we were already negotiating and

subsequently signed), and that we should walk

away from Microsoft’s

search-only proposal (which we did after careful evaluation of

that proposal). Then, in an extraordinary flip flop, Mr. Icahn teamed up

with Microsoft and embraced their latest joint search-only proposal—even

though it involved significant execution and operational risks and was

fraught with flaws that made the “headline

value” asserted by Microsoft and Mr. Icahn

more illusion than reality.

How can Yahoo! stockholders trust Mr. Icahn to deliver what he claims

he can deliver when his actions have been so contradictory –and

when all he has delivered so far is a risky proposal of questionable

value from his new friends at Microsoft? Yes, the Microsoft/Icahn

proposal is somewhat of an improvement over Microsoft’s last search-only

proposal, but no one should confuse a modestly improved offer with a

good offer. The Icahn/Microsoft proposal was more “smoke

and mirrors” than objective reality.

Now let’s turn to the recent marriage of

convenience between Microsoft and Mr. Icahn.

This “odd couple” collaboration –

between two parties with keenly different agendas –

is indeed perplexing. Why does Mr. Icahn believe he can count on

Microsoft to complete a transaction? Certainly Microsoft is a

well-respected and successful company and we have been clear that we are

fully prepared to do a deal with them. But Microsoft’s

flip flops and inconsistencies over the past five months are so

stupefying that one can only conclude that Microsoft was never fully

committed to acquiring Yahoo! either because:

• Microsoft can’t decide what is and isn’t

  strategically important to its online business; or

• Microsoft is more interested in destabilizing a key competitor so that

  it can either enhance its competitive position or buy our highly

  valuable search business—and the enormously

  desirable intellectual property associated with it —at

  a bargain basement price.

Microsoft desperately needs to improve the performance of its online

services business (consisting of its search and display assets) which,

cumulatively since 2003, has lost money despite billions of dollars of

investment. And yet Mr. Icahn would ignore this track record and its

implications for his fellow Yahoo! stockholders, swallowing a deal that

leaves Yahoo!’s future dependent, in part, on

Microsoft’s ability to monetize search. And, as

Mr. Icahn has himself pointed out, it would eliminate any

opportunity we may have to sell the entire Company for an attractive

premium.

In contrast to the conflicting and confusing statements emanating

from the Icahn-Microsoft alliance, your Board and management have been

crystal clear about our position.

First, we will sell the entire Company to

Microsoft for $33 per share or more if Microsoft will negotiate a

transaction that delivers certainty of value and certainty of closing.

This is the simplest, most straightforward way to maximize value for

you.

Second, we remain open to selling only

search to Microsoft as long as it provides real value to our

stockholders and resolves the substantial execution and operational

risks associated with the separation of our search and display businesses.

Third, your Board takes seriously its

obligation to examine all value-creating steps it could take and

continues to actively examine many of these now, including a potential

spin-off of our Asia assets and a return of cash to stockholders.

These are steps Yahoo! could take, if we determine they are feasible and

in our stockholders’ best interests, without any “help”

from Microsoft or Mr. Icahn. But they are complex steps that require

care and prudence. These should not be adopted simply because Mr. Icahn

and Microsoft are trying to dress up Microsoft’s inadequate search-only

proposal.

While your Board continues to evaluate

the foregoing avenues, your current Board and management continue to

execute on our strategy to grow the value of our unique collection of

assets. That strategy is working and we believe it can result in

substantial double digit growth in operating cash flow as we move

forward. Our recently executed search advertising agreement with Google

reflects our commitment to achieving our strategic goals, while

preserving flexibility to pursue a sale of the Company or even, on the

right terms, a sale of our search business.

Please compare and contrast the straightforward, responsible actions

and positions of your Board of Directors with the behavior of Mr. Icahn

and Microsoft.

There you have the situation, as we see it, put as simply and clearly as

we can. We believe the Icahn slate and agenda present significant risk

to your investment in Yahoo!. We believe you cannot count on Microsoft

to bail out Mr. Icahn’s misguided agenda, at

least not on terms that are in the best interests of Yahoo! stockholders.

In contrast, your Board remains fully prepared to represent your

interests aggressively and conscientiously in the effort to maximize

value—whether that takes the form of

negotiating a transaction that provides full and fair value, with

certainty; finding other ways to unlock and return value to you; or

moving forward with our accelerated strategies to lead in online

advertising.

Your Board of Directors remains committed to maximizing stockholder

value. It is—and will remain—our

number one priority. Do not be fooled into thinking otherwise by Carl

Icahn.

We strongly urge you to vote your WHITE Proxy Card today for your

current Board of Directors.

Thank you for your support.

Roy Bostock	Jerry Yang
Chairman of the Board	Chief Executive Officer
If you have any questions about voting your shares, please contact:
MacKenzie Partners, Inc.
105 Madison Avenue
New York, New York 10016
(212) 929-5500 (Call Collect)
or
Call Toll-Free (800) 322-2885
Email: [email protected]

Forward-Looking Statements

This letter contains forward-looking statements that involve risks and

uncertainties concerning Yahoo!’s projected

financial performance as well as Yahoo!’s

strategic and operational plans. Actual results may differ materially

from those described in this letter due to a number of risks and

uncertainties. The potential risks and uncertainties include, among

others, the expected benefits of the commercial agreement with Google

may not be realized, including as a result of actions taken by United

States or foreign regulatory authorities and the response or acceptance

of the agreement by publishers, advertisers, users and employees; the

implementation and results of Yahoo!’s

ongoing strategic initiatives; the impact of organizational changes;

Yahoo!’s ability to compete with new or

existing competitors; reduction in spending by, or loss of, marketing

services customers; the demand by customers for Yahoo!’s

premium services; acceptance by users of new products and services;

risks related to joint ventures and the integration of acquisitions;

risks related to Yahoo!’s international

operations; failure to manage growth and diversification; adverse

results in litigation, including intellectual property infringement

claims; Yahoo!’s ability to protect its

intellectual property and the value of its brands; dependence on key

personnel; dependence on third parties for technology, services, content

and distribution; general economic conditions and changes in economic

conditions; potential continuing uncertainty arising in connection with

Microsoft’s various proposals to acquire all

or a part of Yahoo! and the announced intention by Carl Icahn to seek

control of our Board of Directors; the possibility that Microsoft or

another person may in the future make other proposals, or take other

actions which may create uncertainty for our employees, publishers,

advertisers and other business partners; and the possibility of

significant costs of defense, indemnification and liability resulting

from stockholder litigation relating to such proposals. More information

about potential factors that could affect Yahoo!’s

business and financial results is included under the captions “Risk

Factors” and “Management’s

Discussion and Analysis of Financial Condition and Results of Operations”

in Yahoo!’s Annual Report on Form 10-K for

the fiscal year ended December 31, 2007, as amended, and the Quarterly

Report on Form 10-Q for the quarter ended March 31, 2008, which are on

file with the Securities and Exchange Commission (“SEC”)

and available at the SEC’s website at www.sec.gov.

All information in this letter is as of July 17, 2008, unless otherwise

noted, and Yahoo! does not intend, and undertakes no duty, to update or

otherwise revise the information contained in this letter.

About Yahoo! Inc.

Yahoo! Inc. is a leading global Internet brand and one of the most

trafficked Internet destinations worldwide. Yahoo! is focused on

powering its communities of users, advertisers, publishers, and

developers by creating indispensable experiences built on trust. Yahoo!

is headquartered in Sunnyvale, California.

Yahoo! and the Yahoo! logos are trademarks and/or registered trademarks

of Yahoo! Inc. All other names are trademarks and/or registered

trademarks of their respective owners.

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