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Yahoo leans on rival Google to keep Microsoft at bay

SAN FRANCISCO — Yahoo to Microsoft: We've got options.

Trying to fend off the software giant's unsolicited takeover bid, Yahoo Inc. said Wednesday that it planned to experiment with putting ads from Google Inc. in its Web search results.

Yahoo also is close to unveiling a complex plan that would combine its Web site with Time Warner Inc.'s fallen Internet star, AOL. Under that plan, Yahoo also would spend billions of dollars to buy back stock to put some money in shareholders' pockets, according to a Wall Street Journal story Wednesday night that cited unnamed people familiar with the matter.

But Microsoft reportedly is mounting a counterattack if Yahoo's maneuvering forces it to raise its bid. In a surprise twist, Microsoft has contacted Rupert Murdoch's News Corp. about joining forces to buy Yahoo, according to a New York Times report late Wednesday, that cited people involved in the discussions.

Yahoo has been working for more than two months to put together a package that trumps Microsoft's takeover bid.

The test with Google, which Yahoo said was limited and would last only two weeks, marks a rare public acknowledgment that the Internet company has been talking with its top rival as it seeks ways to avoid accepting Microsoft Corp.'s roughly $40-billion buyout offer.

Legal experts have said that a broader Web-search deal between Google and Yahoo would face tough antitrust scrutiny. It also wouldn't preclude Microsoft from acquiring Yahoo. But it could give Yahoo more ammunition to argue that it can revitalize its business without selling to Microsoft.

Microsoft on Saturday threatened to launch a proxy fight, nominate its own slate of directors to Yahoo's board and lower its offering price if the companies didn't reach a deal by April 26.

Yahoo said Google ads would adorn no more than 3 percent of its search results and would appear only to visitors from its U.S. home page.

Yahoo said the testing didn't "necessarily mean" that it would become a full-fledged partner of Google's advertising program "or that any further commercial relationship with Google will result."

Microsoft responded quickly to Yahoo's announcement, raising concerns that competition would suffer if the Web-search market's two biggest players reached a broader deal.

"Any definitive agreement between Yahoo and Google would consolidate more than 90 percent of the search advertising market in Google's hands," Microsoft said in a statement. "This would make the market far less competitive, in sharp contrast to our own proposal to acquire Yahoo. We will assess closely all of our options."

Government officials are also paying attention.

Yahoo leans on rival Google to keep Microsoft at bay 04/09/08 [Last modified: Thursday, October 28, 2010 10:26am]
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