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Week in review: Microsoft seconds Icahn bid

Steve Ballmer and Carl Icahn team up to oust Yahoo's board, while the release of the new iPhone draws crowds worldwide. Also: A major flaw in Internet gears.

Microsoft apparently likes where activist investor Carl Icahn is going and is in support of his proxy fight.

Microsoft released a letter that threw its support behind Icahn's efforts to unseat Yahoo's board and shelve Yahoo CEO Jerry Yang, as well as confirming its interest to explore a bid to buy the entire company--or just its search assets, with a new board.

In a letter to Yahoo shareholders, Icahn said: "Steve (Ballmer) 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, in the alternative, purchasing the whole company."

Microsoft issued a letter confirming Icahn's remarks about Microsoft's renewed interest in a transaction with Yahoo: "While, of course, there can be no assurance of a future transaction, we will be prepared to enter into discussions immediately after Yahoo's shareholder meeting, if a new board is elected."

Microsoft could lend a greater hand to Icahn's proxy battle if it were to go directly to Yahoo's investors with a tender offer and work in tandem with Icahn's proxy battle.

A tender offer could include all the details of a buyout offer and be set to expire sometime after Yahoo's annual shareholders meeting. That would give investors a guarantee that a deal was waiting to be done at the end of the day.

Both Microsoft and Icahn noted in their statements that there is no guarantee a transaction of any kind will definitely occur, should Icahn's slate be elected.

Despite this significant turn of events, Icahn has yet to pull the trigger and announce whether he will ultimately run a full slate of dissident directors against Yahoo's nine-member board to take control of the company, or only put forth a partial slate to go for less than a majority of the seats on the board. Until Icahn files his definitive proxy, he isn't able to distribute proxy cards asking Yahoo investors to vote for his nominees, or to hit the investor road-show circuit touting his candidates.

Although there could be a variety of reasons why Icahn has not yet filed his definitive proxy, ranging from addressing any last-minute changes requested by the Securities and Exchange Commission to unexpected delays over Fourth of July weekend, it could provide the investor activist with an additional bargaining chip in achieving a friendly Yahoo-Microsoft deal before he finalizes his proxy plans.

Meanwhile, Yahoo counterpunched, issuing a statement expressing its interest in talking to Microsoft about a buyout of the entire company, if only someone would make an actual offer, and the right kind of offer.

iPhones holds the line
to throngs of waiting buyers, many of whom had to wait for activation server crashes to be resolved before they could get their hands on the new phones.

Apple launched the latest version of its iTunes Store a day earlier than anticipated. iTunes version 7.7, available now for Windows and Mac, includes the App Store, a method for delivering third-party iPhone applications.

However, the download appears to have some quirks: for some, the version number remained at 7.6.2, and no direct link to the App Store was available, but it could still be reached by linking here.

With more than 550 third-party applications available at launch, Apple's new mini marketplace means that for the first time since the social-application craze started more than a year ago, the hottest new trend has nothing to do with Web-based networks. The implication for Facebook, as well as open-source social network platform OpenSocial, is that if developers see more compelling reasons to build software for the iPhone instead, they could jump ship.

There might be an apples-and-oranges vibe when it comes to comparing social-platform developers with iPhone developers, but the money factor could easily make some of them willing to bridge the gap. For small-time developers, it's become increasingly tough to make a buck or two from applications on Facebook's platform, where the easiest route to cash is ad impressions.

One of the new features available at the iPhone App Store is the ability for iPhone and iPod Touch owners to use their devices as remote controls for their iTunes libraries and Apple TV boxes. With the free, 1-megabyte application installed, an iPod Touch or iPhone can use a Wi-Fi connection to control and search through an iTunes library remotely, flip around on an Apple TV, and control AirTunes speakers.

While the launch of the new iPhone App Store went fairly smoothly, the migration of Apple's .Mac service to the new MobileMe service apparently didn't go as smoothly as it could have. The scheduled changeover of users' .Mac accounts to MobileMe, or .Me accounts, was scheduled for 6 p.m. to midnight PDT Wednesday. The migration was then pushed back to 8 p.m. to 2 a.m.

But Thursday at 11 a.m. PDT, neither service was accessible, at least to several people in San Francisco. Reader Deidre Wyeth also complained that .Mac account photos were inaccessible Thursday, and instead the site redirected to the page.

If you aren't like the throngs of shoppers with iPhone fever, there are plenty of alternatives that offer similar style and features. And they may even be easier on your wallet in the long run.

CNET News' Marguerite Reardon has compiled a cheat-sheet that highlights key features and points out short-comings of seven possible iPhone alternatives. She also threw in pricing information, not only for the phone, but also for the service plans that go with them.

Fixing a hole
A major flaw in how the Internet works has put millions of users at risk of being steered to malicious Web sites by attackers. A flaw in the domain name system (DNS), the database that matches a host and domain name with the numerical address of a computer server, could allow an attacker to replace the addresses of popular Web sites with that of a malicious server, said Dan Kaminsky, director of penetration testing for security firm IOActive.

Kaminsky decided to gather the affected parties and discuss it with them first. Without disclosing any technical details, he said, "the severity is shown by the number of people who've gotten onboard with this patch." On March 31, Kaminsky said 16 researchers gathered at Microsoft to see whether they understood what was going on, as well as what would be a fix to affect the greatest number of people worldwide, and when they would issue this fix.

Google is battling a similar specter by using an e-mail authentication technology to keep phishers from luring Gmail users to fake eBay and PayPal Web pages in order to steal usernames and passwords. The technology, DomainKeys, uses cryptography to verify the domain of the sender of an e-mail. It allows e-mail providers to validate the domain from which an e-mail originates, and it enables easier detection of phishing attempts by helping identify abusive domains.

Meanwhile, Microsoft issued a security advisory warning about targeted attacks being launched that exploit a hole in the ActiveX control for the Snapshot Viewer in the Microsoft Access database management system.

Basically, an attacker would have to lure a victim, via a link in an e-mail or IM for instance, to a specially crafted Web page that could exploit the security hole to allow remote code execution. This would provide the attacker with as much access to and rights on the computer as the logged-in user has.

The ActiveX control, which allows a user to view an Access report snapshot without having the standard or run-time versions of Microsoft Office Access, ships with the standalone Snapshot Viewer and with all supported versions of Microsoft Office Access except for Microsoft Office Access 2007.

Also of note
Perhaps as a result of its potentially impending scarcity, Windows XP is near the top of's software sales list, with the full version of XP Home at No. 15 and the full version of XP Pro at No. 21...Dan Lyons announced in a rambling post that he's shutting down the tech industry phenomenon known as The Secret Diary of Steve Jobs... A 20-year-old college student from Cleveland State University won the $50,000 grand prize in a national texting competition held in New York this week...The U.S. Justice Department has ended its two-year criminal probe of backdated stock options at Apple and has decided not to file charges against current and former executives, including CEO Steve Jobs.