Boy, that Carl Icahn sure moves fast!

Last month it was reported that billionaire Carl Icahn had built up a roughly 4% stake in Internet behemoth Yahoo and was considering launching a proxy fight. Just a few weeks later, he’s already nominated a slate of directors, received a nod from the Federal Trade Commission to buy large blocks of stock and, according to the scuttlebutt, targeted Yahoo (YHOO) chief executive Jerry Yang.

According to CNBC, “Billionaire investor Carl Icahn would seek to remove Jerry Yang as chief executive of Yahoo if Icahn succeeded in a proxy battle against the company over its failure to reach a deal with Microsoft, The Wall Street Journal reported.” This is both good and bad news. 

The good: The possibility alone that Yang could be taken out of the equation could cause the board to go out and seek ways to enhance shareholder value in a hurry. In fact, don't be surprised if the news prompts Yang and crew to place a frantic phone call this morning to Microsoft (MSFT) CEO Steve Ballmer to try to talk him into another sit down. Maybe the company will announce some major cost-cutting initiative, or provide upbeat future earnings guidance. Anything to get the stock moving.

Incidentally -- and this is neither good nor bad -- there's (pure, utter) speculation that Yang might try to cut a behind-the-scenes deal to support a few of Icahn’s board nominees in exchange for keeping him around.

The bad: Very simply, the looming threat of an Icahn-led shakeup could prove distracting for Yahoo’s board and Jerry Yang. The stress could take its toll on the company’s performance and initiatives to grow the business.

Don’t think it can happen? Let’s revisit how Mr. Icahn handled his stake in Blockbuster (BBI), shall we? 

Icahn started building a position in 2004. Soon after he started to heap criticism on then-CEO John Antioco, reportedly for not acquiring Hollywood Video, a competing chain. There was also an issue over CEO compensation. Long story short, Antioco left the company.

To be clear, Blockbuster has undergone some problems over the years, but what toll was exacted by the battle for board seats and Antioco’s job? How big a distraction was the affair? Did it cause the company to take its eye off the ball long enough for Netflix (NFLX) to make inroads, a factor that contributed to Blockbuster's waning share price? 

Whether or not Yahoo follows a similar course remains to be seen. The shakeup, overall, could be a net positive for the common shareholder. Still, it's important not to underestimate the potential damage of a nasty, prolonged proxy battle.

Yahoo was off 25 cents, or almost 1%, in Tuesday’s trading.