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Corporate maneuvering © Corbis

Extra4/10/2008 12:34 PM ET

Internet stars line up to woo Yahoo

Some of the biggest names in media and the Web, including Google, Time Warner and Microsoft, are maneuvering for control of the struggling but still seductive online giant.

By The Associated Press

Yahoo's (YHOO, news, msgs) last-ditch efforts to avoid a takeover by Microsoft (MSFT, news, msgs) appear to be setting the stage for a dramatic finale featuring a rich cast of Internet and media stars.

Eager to frustrate Microsoft in any way possible, Internet search leader Google (GOOG, news, msgs) has already agreed to help out Yahoo by participating in an unusual test that will gauge how much more advertising Google can sell for its struggling rival.

The two-week experiment announced Wednesday will be limited to ads posted alongside a small percentage of Yahoo's online search results in the United States.

Yahoo reportedly hopes to build upon the Google deal by combining its online operations with Time Warner's (TWX, news, msgs) AOL, which has been struggling to regain its stride after stumbling badly for years. Google already handles AOL's search advertising and owns a 5% stake in the Time Warner subsidiary.

As part of the AOL deal, Time Warner would make a cash investment in return for a 20% stake in the combined entity, according to a Wall Street Journal story that cited unnamed people familiar with the matter. Yahoo then would use the Time Warner cash to buy back stock to put some money in shareholders' pockets. Yahoo would pay between $30 and $40 per share for an unspecified amount of stock, the Journal said.

Microsoft's bid was worth about $42 billion, or $29.24 per share, as of Wednesday, when Yahoo shares closed at $27.77. (Microsoft owns and publishes MSN Money.)

If Yahoo's maneuvering raises the pressure for a higher bid, Microsoft reportedly may mount its counterattack with a surprising ally -- Rupert Murdoch's News Corp. (NWS, news, msgs), whose media empire already includes the Fox television networks, The Wall Street Journal and the popular online hangout MySpace.com.

If Microsoft and News Corp. were successful in a joint bid, it would unite three of the Internet's most popular Web sites -- Yahoo, along with MySpace and MSN.com.

The New York Times reported Microsoft's discussions with News Corp. late Wednesday, citing people involved in the discussions.

Yahoo had previously been exploring using an alliance with MySpace as one of its escapes from Microsoft.

Video on MSN Money

microsoft and yahoo logos
With friends like these . . .
Yahoo is very popular all of a sudden. AOL is talking to the Internet giant about a deal to combine their online operations. And a stymied Microsoft is recrafting its Yahoo takeover campaign by talking with News Corp. about a joint bid.
All the negotiations are at a sensitive stage and still could unravel, according to the newspapers' reports.

Contacted late Wednesday, a Yahoo spokesman declined to comment on the reported AOL talks. Microsoft representatives didn't respond to inquiries.

The complex web of deals faces various complications.

Continued: Antitrust issues loom

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