Yahoo shares rise on reports of Microsoft interest
LOS ANGELES (Reuters) - Shares of Yahoo Inc. (YHOO.O) soared as much as 19 percent to their highest level in nearly a year on Friday after two newspaper reports said the company and Microsoft Corp. (MSFT.O) were in preliminary merger talks to take on common foe Google Inc. (GOOG.O)
But the stock pulled back after contradictory reports said the two companies may work out a joint venture or another form of cooperation that would stop short of a full merger. A source close to the situation confirmed that any talks had cooled.
The Wall Street Journal initially said on Friday that the two companies had engaged in merger talks in recent months, but it said later that those talks were no longer active.
The New York Post reported that Microsoft had made an offer to buy Yahoo a few months ago, but Yahoo spurned the advances.
The paper, which put a price tag of $50 billion on a Yahoo takeover, said discussions continue between the two companies.
Yahoo's market value shot to $45 billion from $38 billion before the report. Microsoft is valued at a little more than $300 billion. Both companies declined to comment.
"It's been talked about for a long time, ever since Google came into the picture. I can't imagine a more perfect deal," said Peter Lobravico, vice president of risk arbitrage sales/trading at brokerage Wall Street Access.
In regular trading, Yahoo's stock rose nearly 10 percent to $30.98 on Nasdaq. Microsoft shares fell 1.3 percent to $30.56.
In extended trade, Yahoo shares fell to $30.57 and Microsoft rose to $30.58.
Investment bank Goldman Sachs is advising on the process, the New York Post said. The bank declined to comment.
One banking source said that investment banks had been pitching Microsoft on the idea of buying Yahoo for months.
THREAT FROM GOOGLE
Analysts often dismiss a takeover of Yahoo by Microsoft since the two companies have such different cultures and Microsoft usually prefers to buy small companies with interesting technology.
Both companies are facing a serious threat from Google.
The Web search leader is extending its lead on both companies as it continues to gain market share and grow three to four times faster than Microsoft and Yahoo. Continued...
