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Ceasefire Between Yahoo, Icahn

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Battle is over, but not the war.

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Internet behemoth Yahoo (YHOO) and legendary activist investor Carl Icahn have been engaged in a seeming battle-to-the-death over board seats, shareholder confidence and the future direction of the company.

But this morning, the two parties reached a settlement: 8 members of Yahoo's existing board, excluding Robert Kotick, will stand for re-election. In addition, Icahn will join the board, and the 2 remaining seats will be filled from a list of 9 candidates chosen by Icahn: The 8 members of Icahn's original slate plus Jonathan Miller, former Chairman and CEO of AOL (TWX).

But this isn't the end of the war; at most, it's a temporary ceasefire. Put simply: Once Icahn assumes his seat on the board, do you really think he'll keep quiet?

Hell, no - being Carl Icahn, he's certain to do everything in his power to ensure that his roughly 5% stake appreciates in value.

And I wouldn't watch the gossip pages for news of Icahn and Jerry Yang cuddling up over lattes or swapping casserole recipes any time soon. On the contrary: If management fumbles potentially value-enhancing transactions, or refuses to entertain further negotiations with Mister Softee (MSFT), expect Icahn to be working behind the scenes for the ouster he wanted in the first place.

Recall the Blockbuster (BBI) saga: In 2005, Icahn secured a place on the video chain's board, from which he proceeded to oppose CEO John Antioco's $50 million bonus. By 2007, Antioco was history.

And Yang and company would do well to brush up on their history.

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No positions in stocks mentioned.

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