Yahoo's Second-quarter Profit Drops 18 Percent

Internet giant Yahoo on Tuesday reported a 18-percent drop in second quarter income over the same quarter last year a day after it settled its difference with activist investor Carl Icahn.

The company's net income was 131 million dollars, or 9 cents a share, down from 161 million dollars, or 11 cents a share, a year ago.

Sales were essentially flat at 1.798 billion dollars compared to sales of 1.8 billion dollars last quarter, but were up nearly 6 percent from the prior year.

Yahoo is executing against its strategy, said chief executive Jerry Yang in a prepared statement.

Free cash flow was 231 million dollars, down 30 percent from the 328 million dollars for the same period last year. The company predicted third-quarter revenue at 1.780 billion dollars to 1.980 billion dollars.

Despite a difficult economic environment, we posted solid results in line with the ranges we indicated in April, said Blake Jorgensen, chief financial officer, in a statement.

Tuesday's report follows a dramatic turn of events after Yahoo and Icahn reached an agreement to settle their difference on Monday.

Under the agreement, Icahn will be placed on Yahoo's Board of Directors, and two other seats will be filled based on a list of nine candidates recommended by Icahn.

The moves expands Yahoo's Board of Directors from nine to 11 members, with Yahoo co-founder Jerry Yang to remain as Yahoo's CEO and Roy Bostock to remain as its board chairman.

The agreement ends a showdown that had been slated for Yahoo's annual meeting Aug. 1, when shareholders would have voted on a rival slate of board members proposed by Icahn.

The new agreement signaling a truce in hostilities came four days after Yahoo's board sent a letter dated July 17 to shareholders warning that Icahn, in league with Microsoft, will destroy stockholder value at Yahoo, serving only their very narrow special interests.

Icahn began a campaign to replace Yahoo's board following its rejection in May of a 33 dollars a share, or 47.5-billion-dollar offer from Microsoft for the Internet company.