Yahoo-AOL Talks Rumored To Oppose Microsoft Bid

Microsoft's acquisition bid for Yahoo, initiated at the end of January, today unleashed media reports suggesting that shifting coalitions are forming that could decide Yahoo's fate. However, it all could just be rumor associated with an increasingly harsh exchange stemming from Microsoft's unsolicited takeover proposal.

Wednesday, Microsoft reacted strongly to Yahoo's intention to test Google's ad search engine. Microsoft's General Counsel Brad Smith suggested that antitrust issues were at stake if any deal were made between Yahoo and Google. Today, news accounts suggested that various industry partnerships may be forming to either accelerate Microsoft's bid or form an alternative to it.

According to unnamed sources in a Wall Street Journal story, Yahoo has gravitated closer to Time Warner, with the idea of combining Yahoo's operations with Time Warner's AOL Internet unit.

This same WSJ account stated that Microsoft and News Corp. have engaged in a discussion to jointly acquire Yahoo. (The Wall Street Journal is owned by News Corp.) The New York Times also speculated that Microsoft and News Corp. are considering a joint bid for Yahoo, without citing named sources.

Ironically, Yahoo's CEO Jerry Yang had previously discussed a deal with News Corp.'s Chairman Rupert Murdock as an alternative to Microsoft acquisition bid, but Murdock bowed out, saying last month that he didn't want to have to compete against Microsoft.

Yahoo has been resisting Microsoft's offer over the past couple of months. Microsoft initially offered cash and a $31 per share price of its common stock to acquire Yahoo. Microsoft's stock declined as of Wednesday to $29.24 per share, lowering the final price. Yahoo has consistently issued public statements that it seeks the best deal for its shareholders and that Microsoft's bid undervalues the company.

The unattributed WSJ article suggested that Time Warner plans to integrate AOL into Yahoo and pay Yahoo cash "in return for about 20 percent of the combined entity." It added that Yahoo then plans to use the cash to buy back its own stock, valuing it at "between $30 and $40 a share."

That news seems like a guiding light to Microsoft about what price Yahoo would be willing to accept.

About the Author

Kurt Mackie is online news editor, Enterprise Group, at 1105 Media Inc.

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