The software maker released the 10 nominees from their commitments to the company, the source said on Thursday, indicating Chief Executive Steve Ballmer was firm in his resolve to pull back rather than mount a proxy fight.

Microsoft withdrew its US$47.5 billion (S$65.2 billion) bid for Yahoo last weekend after the two sides failed to agree on price.

'The market may wish that the Yahoo deal may come back together, but Microsoft at least at this point assumes it's over,' Microsoft Chief Research and Strategy Officer Craig Mundie said in an interview in Jakarta.

Yahoo's stock, which plunged 15 per cent on Monday, has partly rebounded on investors' expectations that a deal might still be done. The stock closed up 58 cents, or 2.3 per cent, at US$26.22 on Thursday, but shed 27 cents in after-hours trade.

By releasing the slate, Microsoft frees nominees to sign up for other slates that may be assembled by Yahoo shareholders upset over Chief Executive Jerry Yang's failure to seal a deal.

Members of Microsoft's proxy board have been approached by Yahoo shareholders weighing whether to nominate their own alternative slates, the Wall Street Journal reported.

But analysts said there was only a very short window for such shareholders to act, since any nominations must be made before May 15. Yahoo has set its annual meeting for July 3.

'May 15, which is next week, is not enough time for some other investor group besides Microsoft to put together a slate of directors,' said Ms Shirley Westcott, a managing director of policy at Proxy Governance, an independent advisory firm.

Dissident shareholder Eric Jackson, who leads a group of investors with a combined 2 million Yahoo shares, said he has been calling 'lots of people in the last few days who might serve on a slate' but refused to disclose names.

Although Microsoft never filed its proxy slate with regulators, sources familiar with the matter have said that the company had seriously entertained mounting a proxy campaign before deciding to withdraw its offer for Yahoo.

Former Nextel Partners CEO John Chapple, former Grey Global Group CEO Edward Meyer and Jaynie Studenmund, former chief operating officer of Overture Services, which was acquired by Yahoo, were among the nominees, according to news reports.

Microsoft declined to comment.

The company had sweetened its Yahoo bid to US$33 per share last week, hoping to combine forces to compete with Google in the growing Internet advertising market. But Yahoo refused to go below US$37, causing the talks to fall through.

Yahoo is under pressure from shareholders to come up with an alternative deal, and had conducted a two-week test to outsource Web search advertisements to Google.

Google Chief Executive Eric Schmidt said the test provided good reason for the companies to discuss cooperation, but there was no deal yet.

'We view the test as successful,' Mr Schmidt told reporters before the Web company's annual meeting on Thursday. 'That's a good basis to talk to Yahoo some more.' -- REUTERS