A week ago, Jerry Yang was trying to sound buoyant about the prospects for an independent Yahoo and insisting he was in it for the long haul. “This is not something I got into lightly last year,” he told the Financial Times, referring to his assumption of the chief executive’s title. “It’s too great a company for anyone who does not intend to be here long-term to do this job.”

For Mr Yang personally, the long term looks like it just got shortened considerably. Having spent much of the year fending off Microsoft ’s chief executive, Steve Ballmer, who had strived to stay scrupulously polite despite his mounting personal frustrations, the Yahoo boss on Thursday came under the far more caustic fire of Carl Icahn.

The activist investor made it clear that a bare-knuckle fight for control of the internet media giant has finally broken out – and Wall Street has already placed its bet that Mr Yang will be the loser. Yahoo’s shares ended the day at $27.75 on Thursday, 10 per cent higher than when word first emerged this week that Mr Icahn was thinking of weighing in.

“Irrational” and “unconscionable” were the main charges he levelled on Thursday as he took aim at Mr Yang and a Yahoo board led by Roy Bostock, the non-executive chairman. His comments echoed the angry response last week from some big Yahoo shareholders, including Gordon Crawford of Capital Group, when Microsoft abandoned its bid.

“I can feel the squeeze from here – the amount of pressure [Yang and Bostock] must be under is tremendous,” said Youssef Squali, internet analyst at Jefferies in New York.

Whether this will be enough to force Yahoo into a shotgun wedding with Microsoft is the question that is now uppermost on investors’ minds.

Realistically, Mr Icahn has only until July 3 – the date of Yahoo’s annual meeting – to bring the two sides together, said one shareholder. If no deal looks likely at that stage, Yahoo shareholders may hesitate to overturn the board completely, since that could have disruptive effects on management and the company, this person said.

As long as the Icahn threat remains in place, however, it will provide a rallying point for angry shareholders to gang up and push for a deal. Paulson Group, a hedge fund run by John Paulson, who recently became an instant Wall Street legend with a massive bet against sub-prime mortgages, duly stepped forward later on Thursday, throwing his 3.4 per Yahoo cent stake behind Mr Icahn.

For now, Microsoft has decided to remain aloof from the whole affair. A company spokesman on Thursday reiterated that it was now intent on pursuing an independent path for its own internet business. Mr Icahn has tried to make contact with Microsoft to see if it will entertain making a new offer but “hasn’t been able to do that”, according to a person familiar with the situation.

That is the right tactic for now, investors and analysts said on Thursday. One Yahoo shareholder said that if Microsoft took sides publicly it would risk provoking a knee-jerk response from Yahoo. “Ballmer doesn’t want to talk directly to Icahn, he doesn’t want to force Yahoo into Google’s arms,” this person said – a reference to the advertising alliance the two companies have been discussing.

The risk for those investors now agitating for a deal is that Mr Icahn cannot eventually lure Microsoft back to the negotiating table. “Is Microsoft still a willing buyer at $33 [a share], or did they have a big change of heart on that?” said Mark Mahaney, an analyst at Citigroup. “I find it really hard to believe they really changed their minds after two years stalking Yahoo.”

Even if that view proves correct, Mr Icahn will still have to find a way to calm the personal animosity stirred up by the earlier failed talks. “Ballmer’s pretty emotional about this stuff,” said one person who knows him. Any future talks would probably only be able to take place if the Yahoo CEO was sidelined.