Week in review: Heat returns to Yahoo

Billionaire investor Carl Icahn filed his preliminary proxy statement with the Securities and Exchange Commission, outlining the backgrounds of his proposed director slate and encouraging shareholders to use his gold ballots to vote in the upcoming shareholder meeting. Among those proposals are the hiring of a new CEO to replace Jerry Yang; offering to sell Yahoo to Microsoft in a friendly transaction; and eliminating the controversial employee severance plan.

However, a deal between Yahoo and Microsoft may already be in the works--or not, depending on whom you believe. One major investor who has been in contact with both parties told CNET News.com that Microsoft has signaled that it is willing to sweeten its previous offer for a partial buyout of Yahoo's search business.

The source noted that several of Yahoo's nine board members, including its chairman, Roy Bostock, have since indicated a willingness to hold further discussions with Microsoft on a possible deal to sell the search operations. The source also questioned whether unrest about the stock price would force a change at the top as well. "A lot of Yahoo directors are fed up with the process of what's been happening," the source said.

However, several other sources told News.com that the latest talks involve a deal short of an acquisition. One source basically said that Microsoft is not interested in a full purchase but remains open to talking about a search deal.

Meanwhile, Yahoo, under intense pressure, announced a reorganization of its upper management in a plan designed to improve its products, underlying technology, and operational execution. The new structure leaves Yang and President Susan Decker at the top of the org chart.

Yahoo plans to hire an executive to run an "insights strategy team," with responsibilities for centralizing and running a Yahoo-wide strategy regarding use of data and analysis. The company also is forming some new groups within its technology organization. One will be an audience technology group, while another will focus on cloud computing and data infrastructure.

Yahoo has undergone an executive exodus in the last two weeks, losing three executive vice presidents, two senior vice presidents, and others. It's not clear to what extent those departures were the cause or the result of the reorganization plan, but Decker indicated in a statement that the reorganization has been under way for months.

Bon voyage, Bill Gates
After this week, weightier issues than a Yahoo takeover will occupy Microsoft co-founder Bill Gates' time. On Friday, he stepped away from his full-time job at the tech titan he founded three decades ago, a transition two years in the making. After the end of this month, Gates plans to spend only 20 percent of his time as Microsoft chairman. The rest of his time will be devoted to the Gates Foundation and other pet projects.

As he went about clearing his desk, Gates took some time out of his schedule recently to sit down with News.com's Ina Fried and offer some reflections on the early days of the PC market as well as thoughts on where Microsoft is now and what technologies he will need in his new role, working full time for the Bill and Melinda Gates Foundation.

After 32 years of competition and acquisition, Gates managed to ruffle some feathers, while still making some famous friends. But as he steps down, tech company CEOs, founders, and presidents are bidding farewell to Gates and the legacy he created at Microsoft. Many have high hopes that he will continue to change the world through his foundation, while some are just breathing a sigh of relief that his bullying days are over. Read the thoughts shared by the likes of Apple CEO Steve Jobs, Microsoft CEO Steve Ballmer, former Broadcast.com CEO Mark Cuban, and Dell CEO Michael Dell, just to name a few.

News.com has taken a video look back at Gates' career and served up some highlights from his recent speeches.

Facebook face-off
A hearing in a dispute between Facebook and ConnectU wrapped up early with no ruling after the federal judge overseeing the matter closed the proceedings to the public and the press.

The legal battle between the two social-networking sites has gone on since 2004, when ConnectU founders sued Facebook founder Mark Zuckerberg and several other early employees for allegedly stealing ConnectU's code and business plan while they were all students at Harvard. Facebook countersued in 2005, claiming that ConnectU had hacked into its user database to mine e-mail addresses.

The lawsuits were settled earlier this year. ConnectU now says Facebook, the most popular social network in the world, entered into the settlement fraudulently. Therefore, it says, the case must be reopened.

As News.com's Declan McCullagh notes, kicking the public out of a courtroom is an option that should be used rarely, and extremely judiciously, which is what makes U.S. District Judge James Ware's decision disappointing.

Now Ware has decided to enforce the settlement that Facebook and would-be rival ConnectU signed in February, rejecting the ConnectU founders' claims of fraud. Both parties must still show up in court on July 2--a "speak now, or forever hold your peace" sort of occasion. But it appears that the public will remain shut out.

Also of note
The Internet Corporation for Assigned Names and Numbers voted to relax rules for naming Web sites...Microsoft and Google joined a collection of insurers and health care providers in endorsing privacy standards intended to protect medical records stored online...Internet service provider Charter Communications announced that it was indefinitely suspending the use of a controversial tool to track its customers' movements on the Web.