Microsoft prefers own Yahoo bid among options: source

SEATTLE/NEW YORK (Reuters) - Microsoft Corp wants to stick with its original takeover offer for Yahoo Inc, but is not ruling out News Corp joining its bid or other options, a source close to the company said on Friday.

Pedestrians walk past the Time Square Yahoo sign in New York April 7, 2008. REUTERS/Joshua Lott

Separately, a source familiar with the matter said News Corp continues to talk directly with Yahoo on reaching a deal without Microsoft. The source declined to provide details on what a potential deal structure would look like.

The source close to Microsoft said the company’s preference all along has been to retain the original deal structure that would involve paying $31 per share in cash and stock to acquire Yahoo. But Microsoft has not ruled out bidding with partners.

Earlier, the Wall Street Journal, which is owned by News Corp, reported that people close to Microsoft said the software maker plans to pursue Yahoo alone rather than with News Corp, which had held talks with Microsoft on a joint bid for Yahoo.

The Journal also said Yahoo’s board of directors met on Friday to assess their options, including deepening their negotiations with Time Warner Inc’s AOL on a deal to merge Yahoo and AOL, but that no decisions were reached.

Spokesmen for Microsoft, News Corp, Time Warner and Yahoo were not immediately available to comment.

The newspaper’s Web site cited unnamed sources as saying that Time Warner had been expecting Yahoo’s board to move closer to backing an AOL deal and that Yahoo’s delays suggested that the company was hesitant to proceed.

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A source familiar with the situation was unwilling to confirm to Reuters the Journal’s characterization of Time Warner’s thinking, but said that talks continue between Time Warner and Yahoo.

Microsoft had threatened last Saturday to launch a hostile bid for Yahoo and could lower its offer of $42.4 billion around April 26 if it does not get a deal.

The New York Times reported on Wednesday that News Corp was in talks to join Microsoft’s bid for the Web pioneer.

Yahoo also announced on Wednesday a test to outsource Web search advertising to Google Inc, which sources say is part of a three-way alliance that would combine Yahoo with Time Warner Inc’s AOL instead of Microsoft.

Additional reporting by Eric Auchard in San Francisco; Editing by Braden Reddall