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Microsoft in talks to buy Yahoo

Fresh talks target Google's online ad growth

Having lost out to Google in a bid to acquire advertising company DoubleClick, Microsoft has initiated a new round of talks to acquire Yahoo, according to published reports Friday.

Microsoft and Yahoo have held informal talks in the past, with the US software giant making an offer for Yahoo that was turned down, according to Friday's New York Post, citing unnamed sources. The fresh talks suggest a renewed urgency on Microsoft's part to make a deal, the paper said.

The companies appear to be in "early-stage discussions" over a merger or some other type of deal that would combine their respective strengths, according to The Wall Street Journal.

Financial analysts have valued Yahoo at approximately $50 billion, the Post reported. Goldman Sachs is working with Microsoft, it said.

Google announced early last month that it would buy DoubleClick for $3.1bn in cash, bolstering the search company's status as an online advertising powerhouse. Microsoft had also been interested in DoubleClick and was understood to have lost out in a bidding war with Google, analysts said at the time.

Microsoft and Yahoo have both been struggling to rein in Google's lead in the search and online advertising markets. Losing DoubleClick and a few other deals to Google, including an advertising tie-up with AOL two years ago, gave Microsoft renewed interest in a merger with Yahoo, the Post reported. "They're getting tired of being left at the altar," a banking source told the Post.

Microsoft and Yahoo could not immediately be reached for comment. They both declined to comment to the Post.

Acquiring Yahoo would expand Microsoft's presence on the web and could make it easier for the software giant to attract new advertising customers. And Yahoo could benefit from Microsoft's technical expertise, the Journal said.

Despite heavy investments in its own search engine and search ad network, Microsoft has not matched the levels of online advertising revenue that Google and Yahoo have achieved. Traffic to Microsoft's websites is strong - it consistently ranks first in website visitors worldwide - but the company has not monetised the traffic effectively.

Microsoft and others, including two civil rights groups, have asked regulators to examine Google's planned DoubleClick acquisition, saying it would be bad for competition in the online advertising market.

(Juan Carlos Perez in Miami contributed to this report.)


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