July 7 (Bloomberg) -- Microsoft Corp. said it may renew talks for a transaction with Yahoo! Inc. if Carl Icahn succeeds in replacing the board, throwing its weight behind the billionaire investor's fight for control of the Internet company.

Microsoft said it might try to buy the search business or the whole company, pushing Yahoo's shares up as much as 12 percent. Microsoft has been in talks over the past week with Icahn, who controls about 69 million Yahoo shares, or about 5 percent.

The software maker's support lends Icahn ammunition in his bid to unseat the directors and replace Yahoo Chief Executive Jerry Yang after they rejected earlier overtures from Microsoft. Investors including T. Boone Pickens, chairman of BP Capital LLC, and Third Point LLC, led by activist investor Daniel Loeb, have said they will back Icahn's slate.

Yahoo rose $1.97 to $23.32 at 9:34 a.m. New York time in Nasdaq Stock Market trading. Earlier the stock rose as high as $23.85, the most since Feb. 1, when Microsoft initially disclosed an offer for the Internet company. Microsoft, based in Redmond, Washington, climbed 36 cents to $26.34.

There can be no assurance of a transaction, Microsoft said in an e-mailed statement today. Yahoo spokeswoman Tracy Schmaler didn't immediately return a call seeking comment.

Microsoft dropped a $47.5 billion takeover bid for Sunnyvale, California-based Yahoo in May after Yang demanded more money. The software maker later began talks on an alternative transaction, which collapsed last month. Combining with Yahoo would help Microsoft triple its share of U.S. Internet searches, narrowing the gap with market leader Google Inc.

Yahoo ``is now moving toward a precipice,'' Icahn said in a separate statement today. ``It is time for a change.''

To contact the reporter on this story: Amy Thomson in New York at jalnwick@bloomberg.net

Last Updated: July 7, 2008 09:45 EDT