Yahoo! Sale Murky After Settlement

SAN FRANCISCO - Yahoo!'s(YHOO Quote) compromise with billionaire investor Carl Icahn may have allowed it to avoid an ugly showdown at its annual shareholder meeting, but it also added even more uncertainty to a potential deal with Microsoft(MSFT Quote).

The new arrangement will end Icahn's battle to replace Yahoo!'s entire board, which he had waged since May after he accused them of botching a merger deal with Microsoft.

"This agreement will not only allow Yahoo! to put the distraction of the proxy battle behind us, it will allow the company to continue pursuing its strategy of being the starting point for Internet users and a must buy for advertisers," Yahoo! CEO Jerry Yang said in a statement.

Icahn said that he continues to believe that the sale of Yahoo! -- whether in its entirety or just its search business -- should remain in consideration.

"I am very pleased that this settlement will allow me to work in partnership with Yahoo! Board and management team to help the company achieve its full potential," he said in a statement.

But now it seems even more unclear if a deal with Microsoft will ever come to being. Microsoft had previously indicated that it cannot work with Yahoo!'s current board and the replacement of only three of them may not make enough of a difference.

Investors reacted to the Icahn-Yahoo! compromise by sending the company's shares down 3% to $21.76 in recent trading.

Throughout his fight with Yahoo!, Icahn had been highly critical of Yahoo!'s management team as well as Yang, who he wanted to see removed as CEO. Icahn had also argued that his own slate would have been better able to negotiate a deal with Microsoft.