Hedge fund manager Eric Jackson, who wants to oust Jerry Yang as chief executive of Yahoo, has dropped plans to propose his own slate of directors for the internet firm because he could not raise enough cash to run the campaign.

"I discovered it would cost upwards of $1 million to propose our own slate of directors, so I have decided to take a less costly route," he said.

Jackson, who owns just 96 Yahoo shares but has the support of three million shareholders, was planning to put up his own directors at Yahoo's board meeting on 3 July to register his displeasure at Yang's inability to strike amerger with software giant Microsoft. The deadline for proposing directors is today.

Jackson will instead throwhis weight behind Carl Icahn, the billionaire investor who is expected to launch his own Yahoo proxy battle in New York today.

Icahn has amassed 50 million Yahoo shares but has not said how he will play his hand. Advisers said last night that he is yet to decide whether to nominate a full or partial slate of candidates to try to replace Yahoo's 10-member board.

Microsoft appears to have abandoned its takeover bid for Yahoo but sources said Microsoft chief executive Steve Ballmer could look again at bidding if Yahoo changes key board members.