Yahoo-AOL deal unlikely before Aug 1: source

SAN FRANCISCO Mon Jul 7, 2008 4:37pm EDT

SAN FRANCISCO (Reuters) - Any deal between Yahoo Inc and Time Warner Inc's AOL division would be unlikely to be struck before Yahoo's annual meeting on August 1, a person familiar with the negotiations said on Monday.

Yahoo and AOL have been talking about merging their Internet operations for a few months, but the talks now factor in the expected boost to Yahoo's bottom line from its search advertising deal with Google Inc, the source said.

Yahoo had also talked with News Corp about combining operations with the media company's MySpace and other Web assets. But those talks fell apart because News Corp sought a value of as much as $15 billion for those assets, the person said. Talks between the two sides are no longer active, said the source, who was not authorized to speak on the record.

Yahoo said in a statement earlier on Monday it was still ready to talk with Microsoft Corp about a full buyout, after Microsoft revealed it was open to buying all or part of Yahoo if the Internet company replaced its board. Shares of Yahoo rose 12 percent to $23.91 on the Nasdaq.

After withdrawing its $47.5 billion offer for Yahoo, Microsoft had proposed an alternative transaction to rival Yahoo's search ad deal with Google. Microsoft's proposal involved buying Yahoo's search business for $1 billion, taking a 16 percent stake in the company for $8 billion and a revenue-sharing partnership that would have delivered an additional $1 billion a year in additional operating income.

Sources familiar with those discussions said on Monday that billionaire investor Carl Icahn, who owns more than 4 percent of Yahoo, had mentioned to Yahoo executives about two weeks ago he would support a partial deal with Microsoft if the software giant guaranteed revenue of at least $2.5 billion a year.

Yahoo's advisers, in negotiating with Microsoft, had also tossed around the idea of a "couple of billion a year" in guaranteed revenue from a partial search deal, but Microsoft was unwilling to pay that much, one source said.

(Editing by Leslie Gevirtz and Braden Reddall)

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