Microsoft, News Corp Not So Cozy on Yahoo! Deal

While a combined Microsoft/News Corp. deal for struggling Internet giant Yahoo! is still a possibility, both companies are allegedly more interested in doing a deal without the other. Microsoft would prefer to see its original $44.6 billion takeover bid for Yahoo! come to fruition, leaving News Corp. and its MySpace online community in the lurch. Meanwhile, News Corp. is still speaking to Yahoo! on the side about a potential merger of Internet services, in a deal that would leave Microsoft out in the cold.

Yahoo!'s board of directors met Friday to assess the increasingly complex set of options facing the company. Predictably, no decision was reached. But the board did authorize Yahoo!'s executive staff to continue meeting with Microsoft and Time Warner, the latter of which is pushing a deal to combine Yahoo! with its AOL online properties. Yahoo! is also investigating the possibility of outsourcing its search-based advertising to Google. However, that deal is ripe with antitrust issues and would damage Yahoo!'s technical advantages.

Last week's news that Microsoft might combine with News Corp. in its bid for Yahoo! was sensational, but as time moves on, this option seems less and less likely. Sources close to those discussions described a potential Microsoft/News Corp. alliance as "conceptual" only, suggesting that neither company is serious about the possibility.