In a stinging letter to Yahoo (YHOO) Chairman Roy Bostock, Icahn criticized CEO Jerry Yang's response to the Microsoft (MSFT) bid, which allegedly included adopting a $2.4 billion poison pill designed to encourage all Yahoo employees to leave in the event of a sale to Microsoft.

"Until now, I naively believed that self-destructive doomsday machines were fictional devices found only in James Bond movies," Icahn wrote. "I never believed that anyone would actually create and activate one in real life. I guess I never knew about Yang and the Yahoo board."

The poison pill came to light Tuesday when a judge unsealed a complaint in a shareholder lawsuit against Yahoo. According to the lawsuit, Yang was so desperate to avoid a deal with Microsoft that he encouraged Yahoo to adopt an ironclad provision that would add more than $2 billion to the cost of a takeover and create incentives for employees to quit following the deal.

The lawsuit cites an e-mail in which the president of a compensation consulting firm retained by Yahoo wrote, "That's nuts," about the severance proposal.

Icahn, who made his name as a ruthless corporate raider in the 1980s, has transformed himself into a shareholder activist in recent years, railing against what he considers excessive CEO compensation. He owns 10 million Yahoo shares and has nominated his own slate of directors.

In his letter, he accused management and the board of putting themselves ahead of their shareholders. "I understand how these actions are in the best interests of management and a board whose members each receive $40,000 per month for several days' work, but it is hard for me to understand how these actions are in the 'best interests of shareholders,' " he wrote.

"The best chance to bring Microsoft and Yahoo together is to replace Yang and the current Yahoo board with a board that will negotiate in good faith."

Although Yahoo hadn't responded to Icahn's letter by Wednesday evening, the company maintains it is open to selling to Microsoft at a reasonable price. When Microsoft upped its offer to $33 per share last month, Yang said Yahoo was worth $38, but that the board would accept $37. At that point, Microsoft walked, and Yahoo stock dropped from almost $29 to below $25. Wednesday it closed at $26.85.

Analysts commended Icahn's efforts, though not necessarily his delivery. "Although we wouldn't agree with his colorful language, Icahn's injecting a serious note of reality into the Yahoo management team," says analyst Jeff Lindsay of Sanford Bernstein.

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