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Yahoo Investors See Imminent Microsoft Proxy Fight

Shares of Yahoorecovered from a Tuesday morning drop as investors speculated that Microsoft will launch a proxy fight for the Web search and advertising giant on Wednesday, CNBC has learned.

People close to Microsoft told CNBC yesterday that the software company is likely this week to wage a fight to replace Yahoo's board with directors of its own choosing. (Get the details in the CNBC video at left.)

Yahoo's stock was under pressure until around noon Tuesday as jittery investors worried that Microsoft may abandon its bid for Yahoo.

Shares of Yahoo closed 3.52 percent higher at $27.36 Tuesday. Microsoft stock lost 1.21 percent to finish at $28.64.