Yahoo announced this morning that agreed to expand its board from nine members to 11, adding activist Carl Icahn, to its board as well as two people from Icahn’s list of board candidates, thereby ending the Icahn’s proxy fight.

So the question becomes what happens now?

Icahn had been hoping to replace Yahoo’s management team so he could then negotiate a sale of the company to Microsoft.

The fact that Icahn settled for less than full control of Yahoo may suggest that he’s no longer hell bent on a sale Yahoo to Microsoft and may be willing to support its deal with Google

“A deal with Microsoft isn’t dead but it’s certainly less likely over the near-term,” said Scott Kessler, an equity analyst with Standard & Poor’s.

Kessler, added though, that he did not expect Microsoft to go away for good.

“Microsoft has pursued Yahoo now for the better part of two years. Just because their ally Carl Icahn has aligned himself more squarely with Yahoo’s management does not mean that a deal won’t eventually happen,” he said.

According to reports if recent history is any guide, Icahn might actually be able to convince Yahoo to start talking to Microsoft again.

Last year, software company BEA Systems rejected a takeover bid from Oracle, but after Icahn, BEA’s largest individual shareholder, threatened to launch a proxy fight for the company’s board, BEA reconsidered and wound up agreeing to sell out to Oracle.

Stifel Nicolaus analyst George Askew suggested in a report Monday morning that the presence of Icahn on the board could entice Microsoft to make another offer to Yahoo.

“The new board structure may bring Microsoft back to the negotiating table to discuss a major transaction with Yahoo including the acquisition of the company or the acquisition of Yahoo!’s search business,” he wrote. “The settlement provides an opening for Microsoft to reopen talks.”

At the very least, Yahoo will need to make some big changes. Raising a ruckus before finally compromising may be Icahn’s MO as of late - but he also has shown that when he settles with a company, he expects immediate action.

Two years ago, Icahn sought to break up Time Warner and went as far to name a list of candidates for the company’s board.

Icahn ultimately decided to drop that proxy fight as well. But Time Warner wound up agreeing to many of Icahn’s demands. It increased its stock buyback program and announced plans to aggressively cut costs.

And earlier this year, Icahn dropped his proxy battle for Motorola a few weeks after the company decided to spin-off its cell phone business, a move that Icahn had been advocating for more than a year.

So Yahoo is going to need to prove to Icahn that it does have a strategy to get back on track.

Askew wrote that Yahoo could announce plans to sell off its Asian Internet assets and launch a big stock buyback program as soon as tomorrow, when the company is set to report its second-quarter results.

Yahoo really disappoints Wall Street when it reports earnings tommorow, Icahn may put more pressure on his future fellow board members to oust Yang.

“One of Icahn’s refrains had been that he wants Yang replaced with a more experienced CEO since Yang, while a great engineer, is not a manager with operational acumen,” Kessler said. “Change at the top is something that might be sought after if Yahoo has a bad quarter.”

So the plot keeps twisting and turning and no one know where it will all end up

Today in trading, Yahoo is down about 3%.

Just got an e-mail saying that the first .ME domains auctions start tomorrow for those domains which received more than 1 pre-order.

The auctions will last 3 days each and we will of course let you know how they are going.

Here are the domains we have on our radar for the next 2 days:

ride.me
why.me
escort.me
translate.me
hug.me

The last name, Hug.me was the same domain that the “Tech Crunch” article discussed last week.

Apparently that domain was given to at least 8 people and now it looks like they it was taken back and placed into an auction.

We would expect hug.me to get the most bidding for the first bunch of .me names.

As we all know Yahoo turned down Microsoft’s offer to buy them for the first time over 2 years ago at $40 a share.

Then in January when Yahoo was floundering at $19 a share, Microsoft came along and offered $31.

Yahoo said there stock was less no less than $37 a share and turned Microsoft down.

Microsoft reportedly raised their offer, informally to $33, Yahoo said no again, they wanted $37.

Carl Icahn took a large position in Yahoo stock and is seeking to replace the board of directors with a slate of his own which presumably would do some sort of deal with Microsoft.

Yahoo ran to Google and entered into a partnership for Google to handle their PPC advertising.

Last weekend Microsoft and Icahn offered another deal to Yahoo to buy its search business which Yahoo also turned down.

Yahoo said this week that it would sell the whole company to Microsoft for $33 a share, which it turned down 2 months ago.

So the question is has any company handled a public negotiation worse the Yahoo has?

We think not.

However the current Yahoo board did get some good news this week, when a one of its largest shareholders, Legg Mason Capital Management Inc, announced that it will be supporting the re-election of the Internet company’s incumbent board, delivering a significant blow to an attempted coup being led by activist investor Carl Icahn.

The final ballots in Yahoo’s battle with Icahn will be cast at the company’s annual meeting Aug. 1.

Legg Mason, a mutual fund manager, owns 4.4% of Yahoo’s stock.

Legg Mason said it believes the current board can just as easily handle any future negotiations with Microsoft as the Icahn-backed candidates.

“We believe the current board acted with care and diligence when evaluating Microsoft’s offers,” Legg Mason Chairman Bill Miller said in a statement. “We believe the board is independent and focused on value creation for long-term shareholders.”

Microsoft has said it doesn’t believe it can negotiate a deal with Yahoo’s current board.

With Legg Mason on its side, Yahoo has lined up support from the owners of at least 14% of its shares, including Yang and fellow Yahoo co-founder David Filo, who together control nearly 10% of the company’s stock.

Another major Yahoo shareholder, Gordon Crawford of Capital Research Capital Investors, has publicly expressed his anger with the company’s board, without stating how he might will vote in the upcoming showdown. Crawford’s decision will be crucial because his fund owns more than 6% of Yahoo’s stock.

Yahoo’s second-quarter earnings report, due out Tuesday, also could affect shareholder sentiment.

After Google’s second-quarter profit disappointed investors Thursday, analysts suspect Yahoo’s results will be a letdown too. If that happens, more shareholders may be inclined to oust a board that has overseen more than two years of financial malaise.

According to reports, Microsoft is ready to start expanding its AdCenter engine to allow at least some publishers to include contextual advertising from Microsoft on their site.

Microsoft is reportedly engaged in a pilot program that allows smaller publishers to use contextual advertising from Microsoft, putting it potentially in competition with Google’s AdSense and Yahoo’s publisher network.

In a statement provided to CNET News on Thursday, Microsoft confirmed the trial.

“Microsoft’s self-serve advertising offering for publishers is still under development and is currently in a private pilot phase, being tested by select publishers who met the participation requirements,” Microsoft said. “The private pilot phase began earlier this year.”

Microsoft pointed publishers interested in the pilot to sign up for the trial.

“It’s our intention to continue to expand our high quality network and relevant audience gradually and intelligently over time for our advertisers,” Microsoft said. “We will evaluate customer interest and product performance as we move through the private pilot, but we have no specific launch plans to announce at this time.”

Microsoft has already struck deals with larger publishers to use its contextual advertising, most recently with Rodale.

This is certainly good news in light of the rumor that Google is about to bounced a substantial number of domains from their program.

More of a reason to root for Microsoft to buy Yahoo rather to let Yahoo outsource their PPC to Google’

Accroding to a report by ComScore today, Microsoft expanded its share of the U.S. search market in June, while Google Inc. had a small decline.

ComScore’s June search report concluded that of a total of 11.5 billion searches conducted in the U.S. during the month, 61.5 percent were conducted on Google sites, compared with 61.8 percent in May.

The report showed 20.9 percent of U.S. searches were on Yahoo sites, compared with 20.4 percent in May.

Microsoft sites captured 9.2 percent of U.S. searches, compared with 8.5 percent in April.

Searches through IAC/InterActiveCorp.’s Ask.com declined to 4.3 percent from 4.5 percent.

Searches through Time Warner Inc.’s AOL LLC declined to 4.1 percent of searches from 4.5 percent in May.

The search report is based on the five major search engines, taking into account partner searches and cross-channel searches. It excludes searches for mapping, local directory and user-generated video sites.

Google annouced Friday that it signed an agreement with Rambler Media Ltd. to buy its Russian contextual ad service ZAO Begun for $140 million.

Google said the deal is part of its moves to improve service for users, partners and advertisers in Russia, which has a fast-growing digital advertising market.

The purchase will enable advertisers to advertise on a larger network of sites, and publishers will get more advertisements to run on their sites, Google said. The acquisition will also result in users viewing more relevant ads on more sites.

“This agreement will result in better search results and more relevant advertising for our Russian users and publishers,” said Mohammad Gawdat, Google’s managing director for emerging markets, in a statement.

Google expects the deal to close in the third quarter.

As we reported earlier, Google released its earnings yesterday.

According to the earning report it seems not that  International markets now account for more than half Google’s business.

According to Google:

“”"Revenues from outside of the United States totaled $2.80 billion, representing 52% of total revenues in the second quarter of 2008, compared to 48% in the second quarter of 2007 and 51% in the first quarter of 2008.”"”"”

Moreover the exchange rates which has moved against the dollar has helped Google’s bottom line in a substantial way:

“”"”Had foreign exchange rates remained constant from the first quarter of 2008 through the second quarter of 2008, our revenues in the second quarter of 2008 would have been $88 million lower. Had foreign exchange rates remained constant from the second quarter of 2007 through the second quarter of 2008, our revenues in the second quarter of 2008 would have been $249 million lower.”"”"

More than 1/2 of Google’s revenue comes from outside of the US.

Does anyone still think we don’t live in a Global Economy.

Citigroup reported its earnings (or lack thereof) today  posting a $2.5 billion second-quarter loss.

However the loss was smaller than expected and Citi is up over 10% today on the news

The nation’s biggest banking company by assets lost the equivalent of 54 cents per share in the April-June period. In the same timeframe last year, the bank earned $6.23 billion, or $1.24 per share.

The Coalition Against Domain Name Abuse (CADNA) held “its seventh educational forum on Brand Abuses and Internet Governance” yesterday in New York City.

According to their press release:

Active Internet of Lake Worth, Florida is selling off  Audio.org and Video.org.

Active Internet registered the domains more than eleven years ago.

Over the years Active Internet says it has received more than five hundred unsolicited offers for the names.

According to the owner, Video.org gets more than 3,500 unique (type-in) visitors a month.

Click Medium is representing Active Internet in the sale of the domain names.

Any parties who are interested in the domains should contact Sean Sullivan directly at sean @ clickmedium.com or at 954-224-6291.