Yahoo and Microsoft have been battling it out for five months, and what began as a tense negotiation between the principals and their bankers has clearly become a something more akin to a street fight.

In the latest round, Yahoo rejected a proposal by Carl Icahn that would have put the activist investor in charge of Yahoo and the company's search business in the hands of Microsoft. That proposal was met with a pugilistic reply from Yahoo Chairman Roy Bostock, who called the idea "ludicrous."

"After negotiating among themselves without the involvement of Yahoo, Icahn and Microsoft presented us with a 'take it or leave it' proposal under which we would be required to restructure the company, hand over to Microsoft Yahoo's valuable search business and to Icahn the rest of the company," Bostock said in a statement. "It is ludicrous to think that our board could accept such a proposal. While this type of erratic and unpredictable behavior is consistent with what we have come to expect from Microsoft, we will not be bludgeoned into a transaction that is not in the best interests of our stockholders."   

Bostock went on to chastise Microsoft for refusing to deal with Yahoo directly, calling the software company's tactics "completely absurd and irresponsible."

Meanwhile, both Yahoo and Microsoft appear to be considering alternative deals. Each has reportedly been talking to officials at Time Warner about linking up with AOL.

As for Yahoo and its coveted search business, the company made waves late last week by announcing its plan to let outside developers use its technology to build their own search engines. While that move drew praise from the industry, few believe Yahoo will be able capitalize on its bold search play in time to fight off Microsoft.