Shares of Yahoo! Inc. [YHOO] were off 2% in early trading Monday as investors tried to figure out the implications of the company settling its proxy fight with Carl Ichan. Under terms of the agreement, Icahn will get three seats on an expanded 11-member board of directors.

The settlement indicates Icahn knew he would fail to get his entire slate elected. Yahoo!, on the other hand, benefits from not having to go through two more weeks of back-and-forth battling with Icahn and now has the chance to add a seasoned Internet voice, if former AOL CEO Jonathan Miller is chosen for one of the board seats. Icahn's chances were dealt a severe blow last Friday, when Legg Mason Capital Management endorsed Yahoo!'s board of directors in the proxy battle.

More importantly, however, are the implications the settlement has on whether Microsoft Corp. [MSFT] buys all or part of Yahoo!. George Askew, analyst with Stifel Nicolaus, on Monday said the new board structure may bring Microsoft back to the negotiating table to discuss an acquisition for all of Yahoo! or just its search business. Though Microsoft on July 7 said it would only discuss a major transaction with a new board of directors, Askew believes Monday's settlement "provides an opening for Microsoft to reopen talks." -- David Shabelman

See July 21 post from Tech Confidential
See July 21 post on Jonathan Miller from Tech Confidential
See July 21 post from Silicon Alley Insider
See July 18 post from Tech Confidential