The Associated Press is reporting that activist investor Carl Icahn is urging Yahoo to say it's willing to accept a takeover offer of $49.5 billion—about $2 billion above Microsoft Corp.'s last bid—in hopes of negotiating a compromise deal.

That price works out to $34.375 per share, which is still within what analysts were initially predicting, but much less than the $37 per share that Yahoo was reportedly demanding.

The report said that Icahn's recommendation marks the first time that he has publicly indicated what price he has in mind, as he tries to force a sale before Yahoo's annual meeting on August 1. If nothing happens by then, Icahn will attempt to overthrow the board and fire Yahoo CEO Jerry Yang. Yahoo said in response it would be "ill-advised" to publicly set a specific sales price, according to the report.