NEW YORK (Reuters) - Billionaire investor Carl Icahn would seek to remove Jerry Yang as chief executive of Yahoo Inc. if Mr. Icahn succeeded in a proxy battle against the company over its failure to reach a deal with Microsoft Corp., The Wall Street Journal reported yesterday.

Mr. Icahn has proposed an alternate slate of directors for Yahoo's board, but has yet to directly target Mr. Yang over the breakdown in talks early this month for a $47.5 billion deal.

"It's no longer a mystery to me why Microsoft's offer isn't around," the Journal quoted Mr. Icahn as saying. "How can Yahoo keep saying they're willing to negotiate and sell the company on the one hand, while at the same time they're completely sabotaging the process without telling anyone?"

Yahoo fired back in a statement: "Yahoo's board of directors, including Jerry Yang, has been crystal clear that it would consider any proposal by Microsoft that was in the best interests of its shareholders."

The Sunnyvale, California-based company said Yahoo has been in extensive talks with Microsoft for the last several months, culminating in Microsoft's decision not to pursue a deal. "Mr. Icahn's assertions ignore this clear factual record."

Microsoft said it has no comment on Mr. Icahn's actions. The two companies are in contact with each other but have nothing to announce at this time, a spokesman said.

Mr. Icahn cited details from court documents related to a shareholder suit that were unsealed on Monday. The documents showed how Yahoo had taken steps to rebuff a Microsoft takeover bid months before the software maker made its offer public on Feb. 1.

The shareholder lawsuit argued that Yahoo had taken aggressive steps to block a deal, including the adoption of a costly plan to retain employees, leading up to a breakdown in negotiations.

Last week, News Corp chief executive Rupert Murdoch dismissed Mr. Icahn's role in the Microsoft-Yahoo tangle as a distraction. Speaking at "D: All Things Digital" conference in Southern California, he said Mr. Icahn was "not serious".

"Look, he wants to make himself a few hundred million dollars for himself," Mr. Murdoch said. "For Microsoft it is helpful noise. If I were Yahoo, I wouldn't worry about it."

Mr. Murdoch said his own interest in doing a deal either with Yahoo or Microsoft involving his MySpace unit had waned after holding talks over the past year with both on various partnerships. He said he was "mystified" by Yahoo's response to Microsoft's offer but said he thought Microsoft would eventually reach a deal with Yahoo.

The Journal said Yahoo's board was due to meet yesterday. Icahn was not immediately available to comment.