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(Updated below with Yahoo's statement.)

Look out, Jerry Yang: Steve Ballmer and Carl Icahn are on a first-name basis.

A deal for all or part of Yahoo could be back on the table if Icahn replaces the company's board with his own slate, Microsoft said this morning. The disclosure confirmed the details of a letter today from Icahn to Yahoo shareholders describing his talks with CEO Ballmer and other Microsoft executives during the past week. Several discussions lasted as long as an hour, Icahn wrote.

"Steve made it abundantly clear that, due to his experiences with Yahoo! during the past several months, he cannot negotiate any transaction with the current board," Icahn told shareholders in today's letter. He added later: "However, Steve 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."

An excerpt from Microsoft's statement:

"As we explained on June 12 when Yahoo! announced an agreement with Google, we believe that our proposed search acquisition and partnership would have delivered superior value to Yahoo!'s shareholders and the marketplace as a whole. We have not changed our position, even as we continue to move forward with our own online search and advertising offerings. We therefore welcome interest by Mr. Icahn in pursuing this and other discussions."

Update, 11:27 a.m.: Here's Yahoo's statement in response:

Yahoo!'s Board of Directors continues to stand ready to enter into negotiations with Microsoft Corporation for an acquisition of Yahoo!. Indeed, as recently as June, Yahoo!'s independent directors and management approached Steve Ballmer about just such a transaction, only to be told that Microsoft was no longer interested even in the price range which they had previously proposed. Now Mr. Ballmer and Mr. Icahn have teamed up in an apparent effort to force Yahoo! into selling to Microsoft its Search business at a price to be determined in a future "negotiation" between Mr. Icahn's directors and Microsoft's management. We feel very strongly that this would not lead to an outcome that would be in the best interests of Yahoo!'s stockholders. If Microsoft and Mr. Ballmer really want to purchase Yahoo!, we again invite them to make a proposal immediately. And if Mr. Icahn has an actual plan for Yahoo! beyond hoping that Microsoft might actually consummate a deal which they have repeatedly walked away from, we would be very interested in hearing it.

Yahoo last week issued a broad defense to Icahn's move, offering its version of events and questioning the motives behind Microsoft's acquisition bid. The public struggle dates to Jan. 31, when Microsoft offered $31 per share, or $44.6 billion at the time, to acquire Yahoo. After that bid didn't succeed, Microsoft proposed an alternative deal involving Yahoo's search business.

Icahn and Microsoft both said it would be premature to discuss such details as price or which type of deal would make sense now. Icahn's letter reiterated that the new board would, if elected, "move expeditiously" to replace Yahoo co-founder Yang as chief executive. Yahoo's shareholder election is Aug. 1.

Today's news follows a report last week that Yahoo and Icahn were working on a compromise agreement to end his challenge. Yahoo's shares, which rose more than 2 percent on that report last week, are up more than 8 percent following the Icahn letter and Microsoft statement today.

See our interactive calendar for a timeline of Yahoo developments to date.