SAN FRANCISCO (AP) – Yahoo Inc. averted a showdown with rabble-rousing investor Carl Icahn on Monday by giving him three seats on its board of directors in a truce that still leaves the door open for a possible sale to Microsoft Corp.

The compromise spares Yahoo from more bickering with Icahn, an acerbic billionaire who had spent the past two months spearheading a rebellion to replace the Internet company’s entire board in retaliation for its rejection of Microsoft’s $47.5 billion takeover bid in May.

The duel had been scheduled to culminate in a shareholder vote at Yahoo’s Aug. 1 annual meeting.

It now appears there will be fewer fireworks at that gathering, although some Yahoo shareholders are still expected to vent about the board’s inability to get a deal done with Microsoft after six months of wrangling.

The main order of business will be the cease-fire giving Icahn three of the 11 seats on Yahoo’s board, which will be expanded.

Eight of Yahoo’s current nine directors will be retained, leaving the company’s current regime – headed by Chairman Roy Bostock and Chief Executive Jerry Yang – in the driver’s seat.

But the compromise, negotiated over the weekend, doesn’t necessarily settle Yahoo’s fate, which has been unclear since Microsoft made its first unsolicited offer in January.

Icahn, who owns a 5 percent stake in Yahoo, emphasized he still believes a sale of all or part of Yahoo may still be the best way for the company to lift its sagging stock price.

Having been repeatedly rebuffed by Yahoo so far, Microsoft has been reported to be discussing a possible acquisition of Time Warner Inc.’s AOL. Microsoft wants to strengthen its Internet business to challenge Google Inc.’s dominance of the online search and advertising market.


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