• February 14, 2008

Reports that Yahoo is discussing a major deal with News Corp. in the face of Microsoft's acquisition attempt spread through the tech blogosphere Wednesday.

A purported deal would spin off News Corp's Fox Interactive Media, including MySpace, IGN and Photobucket, to Yahoo, along with a cash investment that would give Rupert Murdoch's media conglomerate a 20% stake in Yahoo.

That would potentially boost Microsoft's valuation to $50 billion, well above the $44.6 billion Microsoft's bid Yahoo has already rejected. If nothing else, a competing News Corp. bid could help pressure Microsoft to increase its offer.

Analysts expect the software giant to raise its bid from $31 a share to $35 or higher in the coming days. Spokespersons for both Yahoo and News Corp. declined to comment on reports of the companies' purported talks first appearing on Silicon Alley Insider and TechCrunch.

--Mark Walsh