Yahoo, News Corp talks have "cooled": source

By Kenneth Li

NEW YORK (Reuters) - Yahoo Inc's (YHOO.O: Quote, Profile, Research, Stock Buzz) talks with Rupert Murdoch's News Corp (NWSa.N: Quote, Profile, Research, Stock Buzz) on an alternative deal to Microsoft Corp's (MSFT.O: Quote, Profile, Research, Stock Buzz) takeover bid have "cooled" in recent weeks, one source familiar with the matter said on Sunday.

There were no indications that the situation had changed this weekend, after Microsoft abandoned its offer to buy Yahoo for as much as $33 per share, or $47.5 billion.

Microsoft withdrew its offer on Saturday, after balking at Yahoo's request to raise the bid to $37 per share.

The pressure on Yahoo to quickly assemble an alternative solution is high, analysts said, or else the Internet company will likely see its shares plunge on Monday and face a spate of shareholder lawsuits.

The apparent cooling of interest on News Corp's part would narrow the field of options for Yahoo to Time Warner Inc's (TWX.N: Quote, Profile, Research, Stock Buzz) AOL, which some analysts say is unlikely to appease Yahoo shareholders awaiting a big pay-off akin to Microsoft's offer.

In recent months, Yahoo has held discussions to merge with News Corp's Fox Interactive Media, as well as held separate talks to merge with AOL, sources have said. News Corp had also held discussions with Microsoft for a joint bid to buy Yahoo, the sources have said.

Meanwhile, Yahoo is continuing its talks with Google Inc (GOOG.O: Quote, Profile, Research, Stock Buzz) over a tie-up for Web search listings, one source said on Saturday.

A deal with AOL, which outsources its search advertising to Google, would only increase Yahoo's reliance on Google, analysts said.