In his letter, Icahn, who owns at least 59 million Yahoo! shares, described to Yahoo! shareholders his talks with Microsoft Chief Executive Steve Ballmer and other Microsoft executives recently, the Seattle Post-Intelligencer reported Monday.
"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 of Yahoo!, based in Seattle.
If the board were replaced, Ballmer indicated he'd be interested in discussing a "major transaction with Yahoo!," such as buying the search function or the entire company, Icahn said.
Microsoft in January 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's letter reiterated that the new board would, if elected, "move expeditiously" to replace Yahoo! co-founder Jerry Yang as chief executive. The company's shareholder election is Aug. 1.