You have vexed him. Don’t do that.

The letter Carl Icahn sent last week to Yahoo! Board of Directors announcing his plans to launch a proxy fight, should give CEO Jerry Yang reason to stock-up on poison pills. Jerry, you will earn a very good return and I’d get used to the idea that you will soon be sipping pina coladas and clipping bond coupons in a warm climate, because you won’t be running Yahoo! anymore. Carl usually gets his way and it’s wise to not mess with this big dog.

Or, as the star of the BBC hit The Apprentice, Sir Alan Sugar has indelicately said 9 times already this season, “you lost me bloody money, you’re fired!”

There was a moment during Alan Greenspan’s tenure as Central Bank Chief (Federal Reserve Board Chairman) during the dotcom bubble run-up when to words, “irrational exuberance,” caused a momentary cold, that led to pneumonia and finally a burst bubble. When you suffer from founder’s hubris ditherer’s disease, this is often the end result.

Carl lives in the world of cold financial reality vs. most dotcom creators who live in a world of marketing and possibility. When finance and marketing clash, it is never pretty and marketing rarely wins. The bigger the rise, the steeper the fall.

Now we won’t be holding a Jerry Yang benefit concert anytime soon, so it’s best to step away from the company, take the money, give some to Stanford where they’ll name another building after you and ride off into the sunset. You’re young, rich and bright. Go create the next big thing and maybe even pull Steve Jobs, come back bigger and stronger than ever before.

The following is the text of a letter from Carl Icahn to Yahoo’s Chariman Roy Bostock and the board of directors:

Dear Mr. Bostock:

It is clear to me that the board of directors of Yahoo has acted irrationally and lost the faith of shareholders and Microsoft. It is quite obvious that Microsoft’s bid of $33 per share is a superior alternative to Yahoo’s prospects on a standalone basis. I am perplexed by the board’s actions. It is irresponsible to hide behind management’s more than overly optimistic financial forecasts. It is unconscionable that you have not allowed your shareholders to choose to accept an offer that represented a 72% premium over Yahoo’s closing price of $19.18 on the day before the initial Microsoft offer. I and many of your shareholders strongly believe that a combination between Yahoo and Microsoft would form a dynamic company and more importantly would be a force strong enough to compete with Google on the Internet.

During the past week, a number of shareholders have asked me to lead a proxy fight to attempt to remove the current board and to establish a new board which would attempt to negotiate a successful merger with Microsoft, something that in my opinion the current board has completely botched. I believe that a combination between Microsoft and Yahoo is by far the most sensible path for both companies. I have therefore taken the following actions: (1) during the last 10 days, I have purchased approximately 59 million shares and share-equivalents of Yahoo; (2) I have formed a 10-person slate which will stand for election against the current board; and (3) I have sought antitrust clearance from the Federal Trade Commission to acquire up to approximately $2.5 billion worth of Yahoo stock. The biographies of the members of our slate are attached to this letter. A more formal notification is being delivered today to Yahoo under separate cover.

While it is my understanding that you do not intend to enter into any transaction that would impede a Microsoft-Yahoo merger, I am concerned that in several recent press releases you stated that you intend to pursue certain “strategic alternatives”. I therefore hope and trust that if there is any question that these “strategic alternatives” might in any way impede a future Microsoft merger you will at the very least allow shareholders to opine on them before embarking on such a transaction.

I sincerely hope you heed the wishes of your shareholders and move expeditiously to negotiate a merger with Microsoft, thereby making a proxy fight unnecessary.

Sincerely yours,

CARL C. ICAHN