Yahoo shares inch lower after Icahn compromise

NEW YORK - Shares of Yahoo Inc. inched lower Monday after the Internet icon settled with activist investor Carl Icahn, who had wanted to replace the company's board after it rebuffed Microsoft Corp.'s $47.5 billion takeover bid in May.

Yahoo relinquished three seats on its board to Icahn, who owns a roughly 5 percent stake in the company, ahead of its Aug. 1 annual meeting. Eight of Yahoo's current nine directors will remain on the board, and the total number of seats on the board will increase to 11.

Stifel Nicolaus analyst George I. Askew said in a client note the settlement signals that "Icahn is confident that Yahoo's board is serious about incremental corporate actions to create shareholder value."

He added that he thinks the new board structure could bring Microsoft back to the negotiating table to discuss a major deal — including the acquisition of the company or of its search business. Askew kept a "Buy" rating on the stock.

Nonetheless, Yahoo's shares fell 78 cents, or 3.5 percent, to end at $21.67 Monday. The stock is down about about 7 percent year-to-date, and trading well below the $33 per share that Microsoft had verbally offered in May before withdrawing it after Yahoo sought $37 per share.

Icahn, who has argued in favor of selling Yahoo to Microsoft, will be one of the three new directors, as will two of his nominees.

Canaccord Adams analyst Colin Gillis said in a client note that Yahoo's upcoming earnings report will be a "critical" one.

"With pressure to keep shareholders appeased ahead of the Aug. 1 vote, Yahoo may deliver guidance that could prove optimistic in a weak market for display advertising," he wrote. He rates the stock "Hold."

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