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After walking away from an acquisition deal to take over Yahoo, Microsoft said it is considering an alternative proposal with the internet company.

Microsoft abandoned its bid to acquire Yahoo in April following the board's rejection of its $47.5 billion (£24.3 billion) offer. Yahoo claimed the deal undervalued the company and said it would look for "strategic alternatives" to boost shareholder value.

Last week, however, activist shareholder Carl Icahn launched a challenge to Yahoo, proposing to replace the entire ten-member board with himself and nine others.

Mr Icahn claims the failure of the current board to reach an agreement with Microsoft should result in their departure, while Yahoo's board says the decision to refuse Microsoft's advances was the best one for the company.

In a statement on its website, Microsoft said: "In light of developments since the withdrawal of the Microsoft proposal to acquire Yahoo, Microsoft announced that it is continuing to explore and pursue its alternatives to improve and expand its online services and advertising business.

"Microsoft is considering and has raised with Yahoo an alternative that would involve a transaction with Yahoo but not an acquisition of all of Yahoo.

"Microsoft is not proposing to make a new bid to acquire all of Yahoo at this time, but reserves the right to reconsider that alternative depending on future developments and discussions that may take place with Yahoo or discussions with shareholders of Yahoo or Microsoft or with other third parties."

In response, Yahoo confirmed Microsoft is not interested in buying the company at this point. The firm said: "Yahoo and its board of directors continue to consider a number of value maximizing strategic alternatives for Yahoo, and we remain open to pursuing any transaction which is in the best interest of our stockholders.

"Yahoo's board of directors will evaluate each of our alternatives, including any Microsoft proposal, consistent with its fiduciary duties, with a focus on maximizing stockholder value."

According to the New York Times, Microsoft and Yahoo may form a partnership or joint venture for search-related advertising to take on Google.

Meanwhile, Yahoo itself may form a partnership with Google after completing a two-week advertising trial with the search-engine giant.