Microsoft & News Corp to buy Yahoo? Or will AOL?

microsoft!-logo After weeks of inaction, a battle for control of Yahoo Inc. appears to be on the horizon.

The New York Times is reporting that Microsoft is examining the possibility of a joint bid for the beleaguered Yahoo with News Corp.

In contrast, the Wall Street Journal says Yahoo is ready to be bought by AOL, a surprising twist for the beleagueared Internet services company which was all but relegated to the MSN division of Microsoft when the software giant made its initial $44.6-billion offer for Yahoo.

News of a possible Yahoo-AOL tie up is a surprise given AOL’s diminished stature in the tech world. Yahoo, of course, needs to find other options so that it can either wring more money out of Microsoft or hop into bed with what it likely sees as a more suitable bed partner.

AOL could very well be a better strategic and cultural fit than Microsoft and Yahoo, but it wouldn’t do much to restore Yahoo’s fortunes over the short term, it may in fact worsen the company’s situation.

A Microsoft-Yahoo combination would take a long time to iron out too; the acrimony between the already bitter rivals intensified over the weekend as Microsoft chief executive Steve Ballmer and Yahoo founder and CEO Jerry Yang had a testy exchange over the value of the company. Microsoft doesn’t want to take this to a proxy fight but it may now have to if Yahoo is determined to run into the arms of AOL.

The most popular school of thought at the time of Microsoft’s initial offer for Yahoo was that the two companies would eventually come together in matrimony, once the software giant made a second or third offer for the company. Microsoft has said it may lower its bid.

Gamesmanship or not, the staredown has lasted long enough that Yahoo may have managed to find a somewhat viable alternative to Microsoft.

I still say it’s for naught. Credit to Yahoo for finding something resembling a white knight and for its patience. However, it only seems to have bolstered the mighty Microsoft’s resolve.

Its determination will probably leave Yahoo with one less potential suitor to call on should News Corp. buddy up with Microsoft in an attempt to take over t he company.
The deep-pocketed News Corp. also allows Steve Ballmer and co. to up its offer for Yahoo. Watch for it in the coming weeks.

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April 10, 2008 | Filed Under News Items and Commentary 

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