Yahoo stock climbs on Microsoft report

SAN FRANCISCO — Unable to strike a deal on its own, Microsoft reportedly is hoping to snap up Yahoo's online-search operations with the help of News Corp. and Time Warner. The latest twist in Microsoft's convoluted courtship caused Yahoo's shares to rise 3.4 percent Wednesday, even though the chances of a deal still seemed remote.

The reaction to the unconfirmed report in The Wall Street Journal served as a reminder that investors want Yahoo to pursue a different path than the one mapped out by Chief Executive Jerry Yang. And that could be bad news for Yang. Unless he can sway shareholder sentiment before the annual meeting Aug. 1, Yang could lose his job in a boardroom coup being attempted by investor Carl Icahn.

Microsoft is trying to recruit News Corp., Time Warner's AOL or other media partners to put together a joint bid that would slice Yahoo into pieces, according to The Journal. The story cited undisclosed people familiar with the discussions.

Microsoft declined to comment Wednesday. A Yahoo spokeswoman didn't immediately return a call seeking comment.

Under the reported breakup plan, Microsoft would emerge with Yahoo's online search operations, the main object of the Redmond software maker's desire since it began stalking Yahoo as long as ago as 2006.

After the two sides couldn't agree on a price, Microsoft withdrew a $47.5 billion bid for the entire company in early May. Just two weeks later, Microsoft offered $1 billion for Yahoo's search engine and invest $8 billion more for a 16 percent stake in Yahoo's remaining business.

Yahoo rejected that offer, too, and instead forged an advertising partnership with Google, whose rapid growth prompted Microsoft's bid for Yahoo in the first place.

Now, Microsoft is trying to figure out how to carve up Yahoo's business and hand off the non-search pieces to News Corp., AOL or other media partners, The Journal said.

Desperate to placate its shareholders, Yahoo has resurrected a previous plan to combine with AOL and give Time Warner a minority stake in the merged operations, according to another Journal story late Wednesday, citing unnamed people. The odds also appear slim of that idea succeeding, The Journal reported.

Microsoft CEO Steve Ballmer hoped to pitch his latest breakup proposal to Yahoo in a meeting Monday, but then canceled for unexplained reasons, a person familiar with the situation told The Associated Press.

Yahoo hasn't heard another formal proposal since June 8, said this person, who spoke on condition of anonymity because the talks are considered confidential.

Microsoft's talks with possible partners are still in a preliminary stage and unlikely to culminate in a deal, according to people who spoke to The Journal. But the mere prospect of Microsoft returning with another offer was enough to lift Yahoo shares 68 cents, or 3.4 percent, to close at $20.88. Microsoft shares fell 99 cents to finish at $25.88.

Associated Press reporter Jessica Mintz in Seattle contributed

to this report.