Sunnyvale (CA) – Facing a proxy fight orchestrated by investor Carl Icahn, Yahoo has
agreed to give Icahn a seat on its board of directors, two more seats
to people on a list provided by Icahn and put itself up for
re-election. A sale of the company to Microsoft now appears to be
merely a matter of time.

It turns out that Yahoo’s battle with Carl Icahn, who has brought down numerous boards to its knees in the past (most recently Motorola), did not last too long. After a few rounds of growling, Yahoo retreated and gave in to key demands from Icahn.

Under the terms of the settlement, the eight of the current members of Yahoo's current board of directors, including Roy Bostock and Jerry Yang will be put up for re-election at the upcoming 2008 annual meeting. The board will be extended by two seats, which will be given to two to people on a list of nine people recommended by Carl Icahn. This slate will also include people that will be competing for more board seats with Yahoo’s current board of directors.   

Icahn will receive the seat of Robert Kotick, who has been on the company’s board since 2003 and currently is director, chairman of the board and chief executive officer of Activision Blizzard.

Carl Icahn currently owns of 68,786,320 shares, or 4.98% of Yahoo common stock, currently valued at about $1.5 billion. Yahoo shares fell about 2.3% following today’s announcement.

"We are gratified to have reached this agreement, which serves the best interests of all Yahoo stockholders," said Yahoo chairman Roy Bostock in a prepared statement. Icahn added that he was “very pleased that this settlement [which] will allow me to work in partnership with Yahoo's Board and management team to help the Company achieve its full potential.”

The investor said that he still believes “that the sale of the whole Company or the sale of its Search business in the right transaction must be given full consideration“, but noted that he shares “the view that Yahoo's valuable collection of assets positions it well to continue expanding its online leadership and enhancing returns to stockholders.”

Icahn recently proposed to replace Icahn’s board of directors as well as co-founder and current CEO Jerry Yang to make room for a possible acquisition of the company by Microsoft.