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UPDATED: Yahoo Seeking Deal with News Corp.

The Wall Street Journal reported Wednesday that Microsoft is facing another suitor for Yahoo: Rupert Murdoch's News Corp.

According to the article, Yahoo may be looking to form a partnership with News Corp.'s Web properties, including MySpace, as a way to stave off Microsoft's bid for the company. If the deal goes through, Yahoo would remain independent, with News Corp. gaining a slice of Yahoo that "could be more than 20 percent."

The WSJ's Jessica E. Vascellaro reported that since the day after Microsoft proposed acquiring Yahoo, the Sunnyvale, Calif.-based company has "aggressively" sought out other solutions.

Speculation that News Corp. might be interested in some kind of deal started just days after Microsoft's initial bid, spreading much wider earlier this week. The WSJ story is the first apparent confirmation of the rumor.

Neither company has commented directly on the report.

Yahoo formally rejected Redmond's combined stock-cash bid of approximately $42 million on Monday, to which Microsoft quickly responded that it "reserves the right to pursue all necessary steps to ensure that Yahoo's shareholders are provided with the opportunity to realize the value inherent in our proposal" -- including, analysts speculate, a hostile takeover effort.

Microsoft appears to be moving forward in that front; the New York Post is reporting that Microsoft has hired a firm to contact shareholders directly to gauge their response to the bid.

And some shareholders aren't waiting for the action to reach them; on Tuesday, Yahoo's second-largest shareholder released a statement encouraging Microsoft to up its bid from approximately $31 to $40 per share. And at least one shareholder has filed suit against Yahoo for rejecting the deal.

Meanwhile, another door that once seemed open to Yahoo, Google, appears to be shutting; according to another WSJ story, Google's "enthusiasm has waned" since its initial offer to help Yahoo fight off Microsoft.

Despite all the interest in Yahoo, the company is going forward with its previously announced plans to reorganize, including laying off 1,000 employees this week.

About the Author

Becky Nagel is the executive editor of the 1105 Redmond Media Group's Web sites, including Redmondmag.com, RCPmag.com, RedDevNews.com and VisualStudioMagazine.com, among others.

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