"I can't see Carl walking away. Some guys in tech think they're tough. They don't know what tough is. Carl is a tough guy," said the source.
Whether Icahn is willing to settle with Yahoo is another matter, however.
The investor activist has a track record of running a full slate to fill any available board seats coming up for election during the company's annual shareholders meeting. But in a number of cases, Icahn was willing to settle for fewer seats than he initially sought when launching the proxy campaign, according to statistics from SharkRepellent.net.
Motorola is one example. Icahn launched a , however, he settled for two seats after the cell phone maker agreed to split itself in two and seek input from Icahn. WCI Communities and ImClome Systems are other examples where Icahn was willing to settle with fewer seats.
Currently, Icahn is running a slate of 10 dissident directors to fill the nine Yahoo board seats that are coming up for re-election to one-year terms at the shareholders meeting.
In past proxy fights, typically the company has extended a settlement offer when it's clear that shareholders are lining up their votes for the dissident slate, said the source.
"The other side offers up a settlement when the foot is on their throat and that is usually after ISS and Glass Lewis have weighed in," noted the source.
Advisory firms, such as Proxy Governance, Glass, Lewis & Co. and Risk Metrics Group/ISS Governance Services, issue recommendations to their clients on how to vote on proxy matters. These clients typically include mutual funds, pension funds, and asset managers, folks who hold lots of stock in various companies and, depending on the fund's internal policy, may have to vote their shares exactly the way that their advisory service has recommended. As a result, wooing these advisory firms can have a dramatic affect on the outcome of a shareholder vote.
Icahn is currently involved in another proxy fight that bears some resemblance to his Yahoo fight. This one involves biotech company Biogen Idec.
Biogen, which will hold its annual shareholders meeting on June 19, and Yahoo are proxy contests where both were launched with the hope of a merger transaction, said Warren Chen, managing director of M&A and quantitative analysis for Glass Lewis.
In the Biogen case, Glass Lewis examined the company's ability to hit the milestones it had previously laid out, its performance against its peers and the board's past actions over the last two years on corporate governance issues, said Chen.
And, of course, Glass Lewis weighed the likelihood of a buyer stepping in for Biogen, given Icahn was pushing for the sale of the company. The second filter it ran on the proxy contest was whether company needed to be sold and sold in the current environment, Chen added.
"Our past history on these proxy fights is we rarely agree with the dissident shareholder that the company has to be sold, unless the board has done something really egregious," Chen said. "In Yahoo's proxy fight, this will be the fundamental framework that we'll apply."
In Yahoo's case, Icahn has characterized the board as taking such steps to entrench itself by putting in a controversial employee severance plan, which could be triggered should a change of control take place, like a new board elected or a merger occur, followed with the employees either being terminated or voluntarily quitting should their job duties and responsibilities change over the course of two years.
Icahn and shareholders involved in a lawsuit against Yahoo have characterized as a defacto "poison pill," while Yahoo has characterized as a necessary action to retain employees in face of uncertainty.
Icahn did not return phone calls placed to his office.