Yahoo shares up on Blodget takeover musings

NEW YORK (Reuters) - Yahoo Inc (YHOO.O: Quote, Profile, Research, Stock Buzz) shares rose nearly 7 percent on Friday on renewed speculation, sparked by former Wall Street analyst Henry Blodget that the Internet company could be a takeover target for Microsoft Corp (MSFT.O: Quote, Profile, Research, Stock Buzz).

Kevin Johnson, Microsoft's executive in charge of its advertising business, said on Thursday that the software maker aimed to be one of the top two players in Internet advertising within three to five years.

It aims to get there by increasing its share in Web search, page views, advertising dollars and time spent online.

Digital business blog Silicon Alley Insider connected the dots and said Microsoft was not likely to grow that fast unless it bought Yahoo for its Web search share and display advertising business.

"Buying Yahoo would give Microsoft 30 percent search share instantly. It would also boost Microsoft's ad share close to that 40 percent goal," wrote blog co-founder Blodget.

His opinion of a deal? "We continue to think that a Microsoft acquisition of Yahoo would be disastrous for Yahoo."

Blodget, Merrill Lynch & Co's former high-flying technology analyst, had been accused of issuing misleading reports during the Internet boom to win investment banking business. In the last year, Merrill Lynch has settled for some $164 million lawsuits over accusations it published biased research.

Analysts said the Friday blog entry had impacted trading in Yahoo shares and options.

"It's definitely playing a role. There's nothing else out there that's really newsworthy," said Global Crown Capital analyst Martin Pyykkonen.