Remember back in the Dark Ages before text messaging, when a teenager (let’s call him Jerry Yang) might get a best friend (maybe call him Carl Icahn) to call another friend (say, Steve Ballmer) using three-way calling? With Yang sitting silently on the line, the goal would be for Icahn to goad Ballmer into saying how he really felt about Yang. Well, now that we’re adults, and billions of dollars are on the line, all this is done via proxy battles as is the case with the aborted deal for Microsoft, headed by Ballmer, to buy Yahoo, which is headed by Yang.

The whole thing just gets more and more dramatic — the lack of teen girls notwithstanding. Today, Carl Icahn, who holds a large stake in Yahoo, released a letter to Yahoo shareholders where he says he has spent, like, HOURS on the phone with Ballmer, who was still totally interested in Yahoo. But Ballmer’s, like, so worried that Yang and current Yahoo management might “mismanage” the company during the time it takes to get a deal done (because The Federal Trade Commission can take FOREVER, ya know?)

And Ballmer is putting, like, a ton of dough on the line here, so he needs, like, some kind of assurance that Yang and Co. aren’t going to go screw things up. And in the last attempts, he just didn’t get that, ya know? So Ballmer just HAD to walk away, right? But with a different board, you know, like Icahn’s board? Then, maybe Microsoft could forget about the past and get a deal done. In his letter Icahn says:

I strongly believe that in very short order the new board would, subject to its fiduciary duties, be presenting to shareholders either a purchase offer for the whole company or a very attractive offer to purchase “Search” with large guarantees. I hope to continue to be speaking to Steve over the next few weeks; however, since I do not as yet represent the Yahoo! board, both Steve and I do not wish to get into details over price, or even which of these transactions makes the most sense.

So Icahn, who has, like totally, put up his own slate of directors who would work with Ballmer, could really make this deal happen if shareholders would just, you know, LISTEN to him and vote for his board. Totes!

BTW, the whole crew, including Google and AOL guys, will be in Sun Valley this week for the swanky Allen & Co. media conference. It’s like a high-power slumber party where deals get done and the press gets excluded. Maybe Yang will ditch Ballmer and Icahn for Time Warner CEO Jeff Bewkes who head AOL. Tune in next week for the latest on Gossip Guys.

Update: Microsoft issued its own statement backing Icahn. If Icahn gains control of the board at the Aug. 1 shareholder meeting, Ballmer would talk deals again, either buying just the search assets or possibly the whole company.

Update 2: Yahoo tells Ballmer, “If you want a deal, say that to my face.”

It didn’t quite have the sentimental feeling of the Steve Jobs & Bill Gates talk from last year, but it was interesting to see the dynamic of Steve Ballmer & Bill Gates. I think it was great to see Bill step back and let Steve enjoy the limelight, and not take himself too seriously. I think instead of writing about the whole conversation, I am going to share this tiny bit I captured on video that shows how relaxed Gates is feeling these days, now that he has shifted all responsibilities to Ballmer.

Click To Play

Bill was very candid about Vista and its problems. “We never ship a product that I am satisfied with 100 percent” he said. “There is always improvement. Vista gave us lot of opportunities for improvement.” Funny… anyway

What I did find strangely amusing: the Microsoft duo has a tough time using the phrase “Google” and constantly referred to them as the other guys. I really wish I could ask the duo about why they are so obsessed with Online Advertising? Are they acknowledging that all innovation and growth opportunities in applications and operating systems are done? Why not obsess about being the world’s best on-demand software company? Anyway that’s for another day. I picked up some great notes for my post about Search and the competitive landscape.

Now moving on to Windows 7. The company showed off a nice demo of the multi touch features of Windows 7 and how you could paint with your fingers, or open applications and use maps in the new version of Microsoft’s operating system that comes to market sometime in 2009. (More details and videos here.)

I think if you have used iPod Touch, iPhone and Coverflow, you are not going to be as wow-ed by multi-touch, but I have to admit, that even in its rudimentary form, it looked pretty darn good. I have a feeling Apple is going to bring this to market much before Microsoft. Stacey joked about the new features pointing out that the smudging caused by multi-touch would surely make money for companies like 3M.

Anyway more on the conference tomorrow!

Original Post

I have just arrived at the D6 Conference organized by Kara Swisher & Walt Mossberg. I will have an update in an hour or so. Our good friends at D tell us that Bill Gates is going to show off an early version of Windows 7. Now that is something to look forward to and dig into. I have my trusted Sanyo Xaacti in the tow and I will be doing some video updates from here. Given the noise at the conferences, don’t expect stellar quality but hey, it sure beats nothing.