Yahoo!’s board met over the weekend and rejected a new proposal from Microsoft that would have seen the Internet company broken up.

The proposal, which the board of Yahoo rejected at a meeting Saturday, would have given Microsoft Yahoo's search business, with the rest of the company going to investor Carl Icahn.

The search giant said it had received the joint proposal from Microsoft and Mr Icahn late on Friday and was given less than 24 hours to accept. It said Microsoft and Mr Icahn made clear they were unwilling to negotiate the fundamental terms, which included the immediate replacement of Yahoo!'s board and removal of top management.

"This odd and opportunistic alliance of Microsoft and Carl Icahn has anything but the interests of Yahoo!'s stockholders in mind," Yahoo! chairman Roy Bostock said.

"Clearly Microsoft, having failed to advance in search, is aligning with the short-term objectives of Mr Icahn to coerce Yahoo! into selling its core strategic search assets, on terms that are highly advantageous to Microsoft but disadvantageous to Yahoo! stockholders," Mr Bostock said.

The move comes a few weeks before Yahoo!'s annual meeting on August 1, when Mr Icahn, who owns nearly 5 percent of Yahoo!, is seeking to oust chief executive Jerry Yang and replace the nine-member board with his own slate of directors.