Aug. 1 (Bloomberg) -- Yahoo! Inc. investors re-elected the Internet company's board, with 85 percent of votes supporting Chief Executive Officer Jerry Yang after he fended off a proxy battle with billionaire investor Carl Icahn.

Chairman Roy Bostock was re-elected with about 80 percent of the votes, Yahoo said today in a statement after its annual meeting in San Jose, California. Icahn was appointed to the board after the meeting.

The vote gives Yang a boost as he seeks to revive Yahoo's revenue growth and stock price after the company rejected a $47.5 billion offer from Microsoft Corp. While Yahoo still trails Google Inc. in Internet search users and advertising, Yang said today that his company is closing the gap.

``Yahoo still has pressure to boost its stock,'' said Colin Gillis, an analyst at Canaccord Adams Inc. in New York. ``They've known this day was going to come and go.''

Yahoo director Arthur Kern received the lowest number of supporting votes, with 78 percent, Yahoo said. About 153 million shares were withheld for Yang's re-election, Sunnyvale, California-based Yahoo said in a statement.

The board will expand to 11 members from nine to make room for two of Icahn's nominees, part of an agreement announced last month to placate the investor. The directors will be named by Aug. 15, Yahoo said.

Yahoo, owner of the second most used Internet search engine, fell 9 cents to $19.80 at 4 p.m. New York time in Nasdaq Stock Market trading. Microsoft's offer sent Yahoo as high as $29.98 in February, and the software maker at one point bid $33 a share.

`Massive Transformation'

Yang, 39, said today that Yahoo is on the verge of seeing its Internet advertising strategy pay off.

``We are still in the middle of a massive transformation,'' Yang said. ``The Internet is still the only industry, really, that's growing in advertising revenue.''

Chief Financial Officer Blake Jorgensen said Yahoo is seeing sales growth even amid the economic slowdown. He said the company's balance sheet is ``extremely healthy'' and that Yahoo may repurchase shares and make acquisitions in years to come.

Bostock said today that Microsoft never made its $33 a share offer in writing, calling it an ``offhand comment'' that was never communicated explicitly to the board. The software maker also didn't talk about regulatory implications of the deal, he said. Yahoo and Microsoft have sparred over what happened during the negotiations.

``Yahoo is attempting to rewrite history yet again with statements that are not supported by the facts,'' Redmond, Washington-based Microsoft said today in an e-mailed statement.

Performance

Bostock said Yahoo is meeting its goals and credited executives with ``one hell of a performance.''

Some Yahoo shareholders applauded after Eric Jackson of Ironfire Capital LLC asked for Bostock to resign if investors withhold enough votes. Bostock said he won't step down.

Yang, wearing an open collar shirt and a blazer, thanked investors for their comments, telling Jackson it was nice to see him again. He told another investor who called him ``Mr. Yang'' that he was unaccustomed to such formality.

More than 100 shareholders attended the meeting and appeared to be outnumbered by empty chairs. Outside the meeting room, Yahoo employees wearing purple polo shirts, the color of the company's logo, offered technology demonstrations on flat- panel screens.

`Nonevent'

The meeting may have disappointed people who had expected a fight between Icahn and the board, Gillis said.

``The event of the summer was a nonevent,'' Gillis said. He has a ``hold'' rating on the stock.

Since Yang took over in June 2007, Yahoo stock is down 30 percent. The company's share of the U.S. Web-search market has dropped 4 points from 25.1 percent, according to researcher ComScore Inc. in Reston, Virginia. Analysts estimate net sales growth will slow to 10 percent this year, the fifth straight annual decline.

Director Robert Kotick left as part of the deal with Icahn, Yahoo said.

Former AOL chief Jonathan Miller, who was nominated to fill an opening, isn't allowed to work for Yahoo because he pledged not to join any of Time Warner Inc.'s competitors until next year, the media company said. Miller, 51, left AOL in 2006. Yahoo spokeswoman Diana Wong declined to comment.

Bostock told investors that Yahoo's board was in charge of the talks with Microsoft. Icahn had accused Yang of sabotaging the takeover.

``I want to make it absolutely clear to everyone that the board controlled the process of dealing with Microsoft right from the beginning,'' Bostock said. ``We called the shots and we were deeply involved in every step.''

To contact the reporters on this story: Crayton Harrison in San Jose, California, at tharrison5@bloomberg.net; Amy Thomson in New York at athomson6@bloomberg.net.

Last Updated: August 1, 2008 18:05 EDT