Champagne wishes and caviar dreams are now but a memory for billionaire shareholder-activist Carl Icahn, who lost about $125 million today by selling off 16 percent of his ever-losing stake in Yahoo.

The sale of 12.7 million shares at just under $15 a piece is a far cry from the hopes that the famously prickly Icahn had when he started his quest to bring about change and riches for himself by investing in stock of the turmoil-plagued Internet giant in 2008.

As it turned out, he came to Silicon Valley, he saw, he did not conquer.

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BoomTown promised a Yahoo internal memo upon our return from vacation today and we will not let you down.

Thus, here’s a doozie Yahoo CEO Carol Bartz recently sent to her troops, telling them to snap out of their sugar low.

One in a series of weekly Friday communications from her, from mid-August, this one got a lot of attention internally since it was a definite back of the hand for those Yahoos who perhaps dwelled too much on whether or not they liked the recent search deal she struck with Microsoft.

Here’s the basic gist of it: Fie on naysayers, stop bellyaching, Yahoo rocks and get back to work!

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Yahoo is closer to naming a new international head, according to sources, the last big slot left in the top management structure of CEO Carol Bartz.

While BoomTown is endeavoring to get the name of this international man of mystery, the suspect list is long, since Yahoo’s headhunter for the job–Heidrick & Struggles–has pretty much talked to the gamut of international Web muckety-mucks since the search started six months ago.

In a memo to Yahoo staff after her reorganization in February, Bartz said that “international growth is critical for Yahoo!, which has become too reliant on its U.S. business over the years.”

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After months of speculation, interviews and statements to the contrary, Microsoft and Yahoo have finally reached a deal. Details of the story are still emerging, so for your reading convenience, BoomTown’s full coverage is below:

Complete Coverage

• Analysts to Yahoo CEO: Where are Those “Boatloads of Money” You Were Talking About?
• Yahoo Gag Reel
• WWGD: What Will Google Do, Now That There Is Finally a MicroHoo?
• Liveblogging the Yahoo-Microsoft Search Deal Conference Call: The Carol and Steve Show Debuts!
• Yahoo Investors on Microsoft Deal: Do Not Want
• Yahoo CEO Carol Bartz’s Letter About the YaSoft Deal
• MicroHoo Deal Finally Official in a 10-Year Landmark Partnership (Plus the Full Press Release)
• Yahoo To Get 110 Percent of Search Revenue in First Two Years of Deal With Microsoft
• Before Yahoo-Microsoft Deal Terms Are Unveiled, Let’s Go to the Videotape From the Last One
• Microsoft-Yahoo Deal Struck–Will Be Announced Within Next 24 Hours

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With upward of two-thirds of the search market, depending on what survey you use, one would not imagine that Google would worry too much about any kind of hookup of Microsoft and Yahoo.

Think again.

Sources at Google said the company is bracing for a more robust rival, which will force the company to compete and innovate more aggressively.

They add that Google will likely try to keep a low profile at first in opposing the deal announced today, positing that regulators have the same opinion about fewer competitors in the market as they did when opposing a similar Google-Yahoo search deal last year.

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BoomTown was so glad we had this time together with Yahoo CEO Carol Bartz and Microsoft CEO Steve Ballmer, just to have a laugh or sing a song about a major search and advertising deal.

I liveblogged the conference call, which I updated as it happened.

Did Ballmer scream and jump up and down? Did Carol say something naughty?

Read on!

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Here is Yahoo CEO Carol Bartz’s letter to the Yahoo “fans,” which appeared on the company’s blog this morning.

Main messages: Better! Google is a lopsided monster! Microsoft is a frenemy!

And, mostest of all: WOW!

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Finally.

After a decade of competition, several years of push-me-pull-you partnership talks among innumerable execs come and gone and even a hostile takeover that went bad, Yahoo and Microsoft have officially struck a landmark 10-year search and online advertising deal.

While it is in no way as sweeping as some had expected, the deal marks the most important union of digital companies in recent times.

“In simple terms, Microsoft will now power Yahoo! search while Yahoo! will become the exclusive worldwide relationship sales force for both companies’ premium search advertisers,” said the two companies in a joint press release.

Here are the particulars.

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According to several sources close to the situation–under the terms of a pending large-scale deal, in which Yahoo would sell search advertising for its sites and some of Microsoft’s, while Microsoft search technology would power it–Yahoo would get to keep pretty much all the revenue and more for the next three years.

Sources said that in the first two years of the partnership, which is expected to be announced tomorrow, Yahoo would keep 110 percent of all revenue. And, in the third, Yahoo would get 90 percent.

That could represent many billions of dollars, since Yahoo will be selling for both companies.

For Microsoft, the payment will–within four years–allow the company to become the de facto No. 2 search technology player after Google.

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As BoomTown reported earlier today, Yahoo and Microsoft have struck a search and online advertising partnership that sources said will be announced tomorrow.

But it is eminently instructive to look at the deal that Microsoft had offered Yahoo almost exactly a year ago, which was rejected by Yahoo in favor of a competing bid by Google.

The Yahoogle deal, of course, failed, after regulators looked askance at a partnership of the No. 1 and No. 2 search players.

The new deal between Yahoo and Microsoft, according to sources, certainly seems a lot smaller than the one offered last June, although there might be a surprise yet to come.

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Multiple sources close to the situation said that the online search and advertising deal between Microsoft and Yahoo has been struck and will be announced within the next 24 hours.

While it is not clear if the actual papers have been inked or approved by the boards of the two companies, sources said it was a formality and that negotiations are complete on a deal that is less sweeping than originally conceived.

In any case, making any partnership is likely to be the cause of much relief at both companies, since they have been trying–without success–to join together to mount a better offense in the search sector against the dominant Google.

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And there it was in Yahoo’s second-quarter earnings call yesterday, when–as the first question–an analyst asked Yahoo CEO Carol Bartz what she thought about Bing, the new and innovative search offering from Microsoft.

“I think actually Bing is a good product,” said Bartz. “I think they’ve done a good job. I think Microsoft should be given kudos for Bing.”

It was a politic thing to say, to be sure, especially with Microsoft and Yahoo still zeroing in on a search and online advertising partnership deal, as has been previously reported by BoomTown.

Sources I have spoken to over the past two days say the deal is still on good footing and could be struck very soon, even as early as tomorrow, although it is still not a certainty–especially given the bumpy history between Yahoo and Microsoft.

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Yahoo plans on announcing Thursday that it has bought Xoopit for a price in the $20 million range, according to several sources, one of its first acquisitions in a long while.

Reached late this afternoon by BoomTown, a Yahoo spokeswoman declined to comment about the purchase. Xoopit did not respond to emails earlier today.

But sources said it was a done deal to buy the San Francisco-based social email start-up that finds photos, videos, links and other files in email so that users can surface and then share them.

Xoopit’s investors–Accel Partners and Foundation Capital, along with several angel investors–have pumped about $6.5 million into the company since 2006.

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If there’s an earnings call at Yahoo, you know BoomTown is going to liveblog it!

Will Yahoo CEO Carol Bartz say something naughty? (Nope!) What is new CFO Tim Morse like? (Nice!) Will they say anything about the talks with Microsoft about a search and online advertising partnership? (No!)

Oh, it might be a corker!

The earnings results for the second quarter certainly were not.

Here’s the conference call, updated as it happened.

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Yahoo reported so-so second-quarter earnings results today, with a decline in revenue, but with a slightly stronger-than-expected improvement in net income.

For the three months ended June 30, the Internet giant said it had revenue of $1.14 billion, excluding traffic-acquisition costs, down from $1.35 billion in the same period a year ago.

Profit was up eight percent, due to cost-cutting. Yahoo said it earned $141.4 million, or 10 cents a share, in the quarter, compared to $131.2 million, or nine cents.

But that’s not really saying much since Wall Street analysts had such low expectations, estimating Yahoo would earn eight cents. But, with a weak advertising market, it is also not that bad.

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