In what may be the second most watched campaign this summer, Yahoo intensified its barrage against Carl Icahn’s proxy challenge.

A letter to shareholders signed by Chairman Roy Bostock and Chief Executive Jerry Yang argued that after Yahoo rejected Microsoft’s proposal to buy its search business and clinched a search deal with Google, there was scant reason to support Mr. Icahn.

In Thursday afternoon trading, share of Yahoo fell $.45, or 2 percent, to $21.56. Since June 12, when Yahoo announced that talks with Microsoft about a full or partial acquisition had ended, shares of the Internet company have veered toward their 52-week low of $18.58.

Microsoft shares fell $.46, or 1.6 percent, to $27.89 on a day when the broad averages declined sharply.

The letter disclosed that Microsoft’s second proposal to Yahoo, after it had abandoned designs to acquire the company outright, included two deal killers:
--The ceding to Microsoft of veto rights on a future sale of Yahoo;
--And a 10-year deal that would have “made us dependent on Microsoft for all of our search business.”

The Microsoft “hybrid proposal” would have stripped Yahoo of control of search assets and technology essential assets in “the converging search and display advertising business” and would have provided “no meaningful improvement to our operating cash flow,” the letter said.

Microsoft initially offered $44.6 billion to buy all of Yahoo on February 1, but officially withdrew its offer two months later, though discussions continued about a more limited transaction under which Microsoft would have acquired Yahoo’s search business for $1 billion and made an investment in the overall business.

Rumors have persisted in recent days that Yahoo and Microsoft had revived negotiations, though investors who acquired Yahoo shares in the expectation of a takeover would have an incentive to float such reports as they try to unwind their positions.

On June 12, Yahoo announced a nonexclusive deal to outsource part of its search business to Google that it expects to generate $250 million to $450 million additional operating cash flow in the first 12 months.

 Mr. Icahn did not respond to a request for comment.

In light of the uncertainty surrounding its negotiations with Microsoft and Google, Yahoo pushed back its shareholder meeting until August 1.

Mr. Icahn is proposing to unseat Yahoo’s incumbent board of directors with a slate that also includes Dallas Mavericks owner Mark Cuban and venture capitalist Adam Dell.