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Microsoft And Friends Ponder Yahoo Break Up

The Wall Street Journal reports that Microsoft may join forces with the likes of Time Warner and News Corp. In making a run on Yahoo's search business that would ultimately call for the Internet giant to be split up. Microsoft had previously discussed arrangements under which it would acquire Yahoo's search business while News Corp.'s MySpace or Time Warner's AOL would combine with what remained of the company. However, sources say the talks are preliminary and are unlikely to result in a deal.

The Journal also claims that Yahoo in May offered to sell itself to Microsoft for $33 per share--the price many thought to be the magic number--leaving investors and analysts scratching their heads over why a deal did not happen. Yahoo has publicly accused Microsoft of never being fully committed to acquiring the company. Microsoft, meanwhile, blames founders Jerry Yang and David Filo for obstructing the deal. He said, she said.

Either way, the deal's collapse has battered both companies' stock price. Yahoo shares have dropped 27% since May. The company is now battling corporate raider Carl Icahn, who seeks to replace the Yahoo board. Microsoft shares have dropped 18% since the company first made its intentions to buy Yahoo known, as the company struggles to explain its future strategy to investors. Yahoo sources tell The Journal they're not holding their breath over a deal, citing Microsoft's "erratic" behavior throughout the proceedings.

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