The idea that Microsoft, in order to revamp its Internet business, would buy Yahoo seemed surreal when rumors first surfaced in mid-2006. But as Yahoo's troubles deepened in the second half of that year and throughout 2007, and as Microsoft kept spinning its wheels in its online efforts to compete against Google, the idea of a merger began to seem plausible.

On Feb. 1, the rumors became a reality as Microsoft announced its US$44.6 billion acquisition offer for Yahoo. Over the next three months, the companies starred in a highly emotional exchange of accusations, veiled insults and threats that culminated in Microsoft withdrawing its offer on May 3.

That wasn't the end, however. The companies engaged in a fresh round of conflicting accounts as to why the talks collapsed, and Yahoo's CEO Jerry Yang found his actions being publicly second-guessed by vocal shareholders and financial and industry analysts. Now in the latest twist, the billionaire investor Carl Icahn has reportedly bought 50 million shares of Yahoo stock and is considering a proxy fight to replace its board members and rekindle the talks with Microsoft.

Here is a timeline of the major milestones of Microsoft's pursuit of Yahoo:

May 2006: Some of the earliest rumors that Microsoft is considering an offer to buy Yahoo appear in the New York Post and The Wall Street Journal; at the time such a deal is considered far-fetched and the rumors are dismissed fairly quickly.

October 2006: Rumors begin to swirl that Yahoo has approached Time Warner about purchasing AOL, a notion somewhat more believable than a Microsoft-Yahoo deal.

2007: Microsoft-Yahoo rumors surface from time to time but disappear soon after, as there is nothing to substantiate them.

Feb. 1, 2008: In the shot heard 'round the Internet, Microsoft makes a formal purchase offer of US$44.6 billion based on Yahoo's stock price of $19.18; Yahoo's stock price starts rising.

Feb. 11: Yahoo rejects Microsoft's offer as too low; Yahoo's stock price closes at $29.87. According to the rumor mill, Yahoo is now looking for closer to $40 a share because the value of the company has risen since the offer.

Feb. 12: Microsoft for the first time publicly hints in a letter to Yahoo that it is willing to get hostile in its takeover, saying it "reserves the right to pursue all necessary steps to ensure that Yahoo's shareholders are provided with the opportunity to realize the value inherent in our proposal."

The IDG News Service is a Network World affiliate.

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