The future of Yahoo

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[YHOO  Loading...      ()   ] could take an interesting turn now that it’s agreed to appoint activist investor Carl Icahn as well as two of his nominees to the board of directors.

The decision comes just days before Yahoo's Aug. 1 annual shareholders meeting, at which Icahn had originally sought to replace the entire board with his own nominees and oust Yahoo Chief Executive Jerry Yang.

But Icahn did not appear to have the backing of prominent Yahoo shareholders such as Legg Mason fund manager Bill Miller, who said on Friday that he would support Yahoo's board.

“I think it’s a death knell for the Microsoft

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[MSFT  Loading...      ()   ] deal,” says Jeffrey Lindsay, analyst at Sanford C. Bernstein on Fast Money. “The sides have compromised and now Icahn is inside the tent. It’s unlikely that he will agitate for a transaction. I think now all investors can hope for is that he drives change from the inside.”

And Lindsay only expects that change to be modest. "Perhaps Icahn can drive some more staff reductions, persuade Yahoo! to divest its Asia investments," but he doesn't expect a merger anytime soon.

Karen Finerman disagrees. I thinks he will continue to prosecute his case, she says emphatically. Better to be inside than out!

“But he’s outvoted, counters Lindsay, “if he’s going to drive something through he’d have to do it with the consent of the remaining incumbents.”

Meanwhile, Yahoo reports quarterly results on Tuesday and Lindsay isn’t terribly enthused.

“I think it’s plausible they say they’ve been distracted with all that’s going on and that would be understandable,” he says. “I’m not really expecting any upside.”

And that leads to our Charles Schwab Question of the Day!

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Trader disclosure: On July 21, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Macke Owns (WMT), (HAS), (ATVID), (GS), (DIS); Najarian Owns (AMLN), (TSO); Najarian Owns (AAPL) And (AAPL) Puts; Najarian Owns (FHN) Puts; Najarian Owns (MRK) Calls, (YHOO) Calls, (CSCO) Calls; Finerman Owns (GS); Finerman's Firm And Finerman Own (C) And (C) Leaps; Finerman's Firm And Finerman Own (PDE); Finerman's Firm Owns (GE), (MRK), (MSFT), (PPH), (PFE), (SUN), (TSO), (VLO), (AXP); Finerman's Firm Is Short (IYR), (IJR), (MDY), (SPY)

Terranova Owns (RIMM), (GOOG), (YHOO), (INTC), (VLO), (IYT), (CME), (BNI), (FCX), (XLF), (SU); Terranova Is Long Crude Oil Sept. $154 Call; Terranova Is Short Crude Oil Sept. $130 Call; Terranova Is Short Crude Oil Sept. $130 Put; Terranova Is Chief Alternatives Strategist Of Phoenix Investment Partners, Ltd.,Terranova Is Co-Portfolio Manager Of The Phoenix Diversifier PHOLIO

Phoenix Investment Partners Owns More Than 1% Of (DBV), (RWX(, (LNET), (EXR), (SKT), (DLR), (IGE), (ARE), DBC), (ABD), (OFC), (CLB), (BLV), (CNTY), (FL), (HPC), (PSPT), (ESS), (OIIM), (BIG), (ENG), (PFD), (DRH); Phoenix Diversifier PHOLIO Owns (IGE), (DBC), (DBV)

Accounts Over Which Bernstein And/Or Afiliates Exercise Investment Discretion Own More Than 1% Of (AMZN), (GOOG), (IACI); Bernstein Is A Market Maker In (AMZN), (EBAY), (GOOG), (IACI), (YHOO)

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