A month after Rupert Murdoch said News Corp is too small to compete for Yahoo, the media giant is teaming up with Microsoft in a joint take over bid for Yahoo, which would see MySpace brought into the mix.
According to a report Wednesday in the Wall Street Journal, the two industry titans are in "serious talks" over such a to make a bid for Yahoo.
And a New York Times report lays out the type of mashup that is being considered by the software and media companies. Under a deal, Microsoft's struggling MSN would be joined with News Corp's social networking site MySpace, as well as Yahoo, according to a New York Times report.
Although the Journal characterises the talks as "serious," the Times notes they are in a "sensitive stage," and many miles have yet to be traveled before such a deal gets to the finish line.
While terms of a transaction have not been hammered out, the Times cites some sources speculating that News Corp may throw cash into the deal and its Fox Interactive Media unit, which oversees MySpace.
Just last month, News Corp's Rupert Murdoch said he had no plans of getting into a bidding war over Yahoo with Microsoft because his company was "too small".
But Yahoo is in talks to merge with Time Warner Inc's AOL unit, a source familiar with the negotiations said, after Yahoo announced on Wednesday a test to use rival Google Inc's Web search service — a three-way option to try to extract a higher Microsoft bid or even stay independent.
Microsoft has said it will launch a hostile bid for Yahoo and could lower its offer in about three weeks if it does not get a deal from Yahoo, a Web pioneer which argues it is worth more than Microsoft's $42 billion bid.
Any of the combinations, or another yet to be determined, would fundamentally change the Web.
Internet and media players have been circling each other for two years waiting for a game of musical chairs to begin in earnest and lead to consolidation.
"The whole situation seems to be very unstable," said Sanford C. Bernstein analyst Jeffrey Lindsay, adding that Microsoft's bid for Yahoo precipitated a cascade of offers.
"There are so many pent-up moves for consolidation but it's hard to say what moves will be successful," Lindsay said.
Yahoo's talks with Time Warner are growing closer over a deal that would fold AOL's business, excluding its legacy dial-up Internet access operations, into a combined Yahoo company, a person familiar with the talks said.
Yahoo would receive cash from Time Warner in exchange for 20 percent of a combined Yahoo-AOL, the person said.
Microsoft, News Corp, Time Warner and Yahoo all declined to comment on talks.
Terms of the proposed Microsoft-News Corp union are still being worked out, the New York Times said. News Corp would likely contribute its Fox Interactive Media unit, which owns MySpace, and possibly cash to a partnership with Microsoft as part of a Yahoo acquisition, the newspaper said.
AAP contributed to this story