This article (see this page for the first part; the excerpt below is from the second page) is a timely reality check -- and the dimensions outlined below probably suggest the potential deal really is dead
What's more, those institutional shareholders, along with Yang and co-founder David Filo, collectively hold about a third of the stock. And since individual shareholders often don't vote on proxy issues, it's quite possible Microsoft could have lost a proxy fight.
Yahoo's board also appeared to be concerned about nonprice issues of the deal. For one, they sought protection against the possibility that regulators might nix the deal based on the combined entity's dominance in e-mail and instant-messaging services. Moreover, they were concerned about accepting Microsoft's stock, given that Microsoft's strategy vs. Google wasn't bearing fruit either.