The waters are getting decidedly murky in the Microsoft-Yahoo takeover, with News Corp looking keen

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sharks.jpgMicrosoft’s courtship of Yahoo became a little less than friendly over the weekend following Microsoft CEO Steve Ballmer’s ultimatum, which included a three week deadline and a threat to usurp Yahoo’s board of directors. Now Yahoo appears to be seeking comfort in the arms of others in order to forestall the takeover while Microsoft is apparently finding more allies to strengthen its advances.

The Wall Street Journal reports that Yahoo is discussing a deal with Time Warner in order to combine its internet operations with Time Warner-owned AOL. Time Warner would make the investment in return for about 20% of the combined entity, according to sources.

At the same time, Yahoo is in talks with Google about outsourcing search ad sales and will be running a two-week trial of sharing ad space. A broader relationship between the two search giants would probably fall foul of antitrust regulations but even this limited partnership would be a good way of boosting Yahoo’s revenues and has boosted Yahoo share prices, which helps keep Microsoft at arm’s length for now.

However, at the same time Microsoft is in talks with Murdoch’s News Corp. to consider mounting a joint bid for Yahoo. There have been no official details of this and there has yet to be an agreement, but if successful the resultant deal could end up combining My Space, Yahoo and MSN all into one glorious internet overlord.

Such a large amalgamation would have serious issues of complexity to overcome which will likely mar its appeal with shareholders, and in the end it is up to them to decide whether Microsoft’s original more straightforward bid is appealing after all. However, one investor, Bill Miller, a portfolio manager at Legg Mason Inc has already spoken out against Microsoft’s threatening tactics, saying:

“Telling shareholders you’re going to take something away from them is not a way to get their support.”

Expect yet more twists in this tale before anything is set in stone.

Yahoo (via DigitalTrends)

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