Billionaire takeover strategist Carl Icahn is looking at a possible play to force Yahoo back to the table with Microsoft to sell the company at a big profit. The news today sent Yahoo up about 1.30 and YHOO is still rising in after market trading.

Given that the prevailing stock price of Yahoo is well below Microsoft’s top offer of $33 per share, this play has only one key challenge – making sure you can get Microsoft back to the table. Frankly I think that is not much of a hurdle to overcome as I think Microsoft Steve Ballmer’s decision to drop the bid was 1) Mostly strategic to force the issue and 2) Will be quicly overcome if Icahn can seat a more sympathetic board of directors.

I’m guessing that Ballmer will have two basic requirements to return to the Yahoo table:
No Google deals and no more Jerry Yang. Although it would be sad to see a founder of Yang’s vision leave the company one does not need to feel too sorry for him. A Microsoft merger would value his stock close to 100% higher than the lows of a few months back, netting Yang in the neighborhood of an extra half billion over that low price.

Of course Yang has seen Yahoo trading at over $100 and I think part of his malaise over the deal is a longing for the good old pre-Google days where Yahoo was the high flyer in terms of value and buzz. Sorry Jerry, but despite Yahoo’s suberb ongoing work in many aspects of the online experience, those days … are … gone.

Most analysts do not feel Yahoo can sustain even the current price levels without the “threat” of a takeover looming, which is propping up a share price that will likely drop to $20 or below if Yahoo had no serious takeover suitors. In fact YHOO was trading at about $18 per share a few months ago just before Microsoft bid which valued the internet empire at about 60% more than the market. Yet Yahoo argued this was not enough and the board, especially in the form of CEO Jerry Yang, went to great lengths to prevent the Microsoft Merger.

Icahn is no stranger to this takeover strategy and the graph above shows how successful it has been for him.

Image Credit: Fortune Magazine
Disclosure: Long on Yahoo