UPDATE 1-Yahoo holder says won't run director slate

(Adds comments by Jackson, background)

NEW YORK, May 13 (Reuters) - Eric Jackson, a stockholder in Yahoo! Inc (YHOO.O) who last week threatened to run a proxy campaign to elect new board members at the company, on Tuesday said he has canceled plans for the move, saying he couldn't raise the money for a campaign.

Instead, Jackson, who heads investment fund Ironfire Capital, said he plans to run a "vote no" campaign against the current Yahoo directors at the company's upcoming annual shareholders meeting.

Jackson, who said last week he owns less than 100 Yahoo shares, has been critical of Yahoo for failing to agree to a deal to be bought by Microsoft Corp (MSFT.O) in talks that collapsed earlier this month.

"It basically came down to dollars and cents," said Jackson in an interview. "The SEC hasn't enacted some sort of open proxy access and that makes it difficult for a shareholder like me to belly up to the bar and put up $1 million. That's the bind I was in."

Meanwhile, CNBC reported that billionaire investor Carl Icahn, a veteran of numerous proxy battles, is considering running a proxy campaign at Yahoo. Icahn could not immediately be reached for comment.

Shares in Yahoo jumped on the Icahn news. Shares were recently trading up 76 cents, or 3 percent, to $26.02 on Nasdaq.

Shareholders have until this week to file papers to launch a proxy campaign at Yahoo this year.

Jackson was instrumental in a campaign last year to have former Yahoo Chief Executive Terry Semel replaced. He said he was discussing the possible proxy campaign at Yahoo with a group of 150 or so retail shareholders that hold about 3.3 million shares.

Jackson also said he discussed it with large institutional shareholders, but none agreed to put up sufficient funds to employ proxy solicitors, lawyers and mailings required for major proxy battles.

"Our shareholder interests have not been protected by this board if you look at the last four years," said Jackson. "This breakdown in (merger) talks is just the latest example of missteps by the board. The only thing to do is express that opinion and hope that new board members that come in will be more independent minded." (Reporting by Dane Hamilton, editing by Gerald E. McCormick and Dave Zimmerman)