YAHOO, the second most popular search engine, advanced in early trading yesterday on hopes that Microsoft might revive attempts to take over the Internet company.
The shares gained as much as 6.9 percent after the Wall Street Journal said Microsoft, the world's biggest software maker, approached media companies about trying to break up Yahoo. Microsoft talked with Time Warner Inc, News Corp and others, the newspaper said.
The report suggests that Microsoft Chief Executive Officer Steve Ballmer is unwilling to abandon a deal that would more than triple his company's share of Web searches in the United States, helping him take on leader Google. A transaction may also appease Yahoo investor Carl Icahn, who had sought to oust the Internet company's directors.
ICAP Securities analyst Sachin Shah told Bloomberg Television that the companies may complete a transaction valued at US$34 a share before Yahoo's annual meeting on August 1.
Yahoo climbed US$1.40 to US$21.60 in trading before exchanges opened after closing at US$20.20 on the Nasdaq Stock Market. The stock had fallen 14 percent since June 12, when talks on a combination of the two companies collapsed. Microsoft rose 14 cents to US$27.01.
Under the discussions now taking place, Microsoft would buy Yahoo's search operations, the Journal said. Another company, such as Time Warner's AOL or News Corp's MySpace, would combine with the rest of Yahoo, the newspaper said.
Microsoft representatives met Icahn to encourage him in his proxy battle, the Journal said. The billionaire investor began an attempt to oust Yahoo's board in May, after Microsoft first walked away from a takeover of the whole company. Icahn accused Yahoo CEO Jerry Yang of sabotaging the deal.
Microsoft raised its initial bid of US$44.6 billion to US$47.5 billion, but Yahoo demanded more money. Ballmer later sought an alternative transaction short of a full takeover, taking aim at Yahoo's search business.
Yahoo ended those talks after Microsoft made a final proposal to buy US$8 billion of Yahoo shares for US$35 each and acquire the search business. The same day, Yahoo forged an agreement to allow Google to sell some of the advertisements Yahoo runs alongside Internet search results.
Google accounted for almost two-thirds of US Internet searches in May. Microsoft came in a distant third.