Yahoo's woes were increased last night as its attempts to fend off a hostile approach from Microsoft took a toll on its profits.

The internet giant saw net income for the second quarter fall 19 per cent to $131m (£66m) from $161m (£81m) in the corresponding quarter a year ago.

Revenue was $1.8bn (£900m), a six per cent rise from $1.7bn (£850m) in the year-ago quarter.

The Microsoft bids cost the company dear, with $22m (£11m) spent on outside advisors and related litigation defense costs during the quarter.

Earlier this week Yahoo agreed to give activist investor Carl Icahn a seat on its board of directors and the power to nominate two further directors.

The move comes after Icahn and Microsoft discussed a fresh bid for the company last weekend, and seemed to be designed to prevent a hostile takeover.