As Microhoo turns: In today's episode Google goes gunshy; News Corp plays ball

These incremental Microsoft-Yahoo updates can get tiring. At least we're not killing trees with them.
Written by Larry Dignan, Contributor

These incremental Microsoft-Yahoo updates can get tiring. At least we're not killing trees with them. As a public service, here's a roundup of the latest chatter about Microsoft's $44.6 billion bid for Yahoo.

Google gets cold feet. The Wall Street Journal is reporting that has lost enthusiasm for any potential advertising pact with Yahoo. This report could shoot down that "Yahoo should outsource search to Google" defense. Citing people familiar with the matter, the Journal reports that Google is wary of doing a deal with Yahoo because it really doesn't want the regulators breathing down its neck. The Journal used that little nugget to wrap in Legg Mason's comments about Yahoo's dwindling alternatives.

But News Corp. may be feeling the love (or not). Peter Kafka at Silicon Alley Insider reports that News Corp. is talking to Yahoo about a deal that would combine Yahoo properties with Fox Interactive's sites (mostly MySpace). Rupert Murdoch would come out with a big stake in whatever transpired. I've heard worse ideas, but News Corp. has repeatedly said it wasn't interested in Yahoo.

TechCrunch has more on the structure of the deal:

According to our source, the deal structure would spin off Fox Interactive Media (the primary asset is MySpace, but IGN, Scout Media, Photobucket, Fox Sports, AmericanIdol.com, Flektor, Ksolo; plus investments in Hulu, Simply Hired and Snocap are also assets of FIM) into Yahoo, along with a big cash injection from News Corp. and an unnamed private equity fund. The total investment would be valued at around $15 billion.

Overall, Yahoo would be valued at about $50 billion. News Corp. would own 20 percent of Yahoo and Rupert Murdoch would effectively control the company. The structure makes a lot of sense. In fact, Microsoft may want to swipe this model to form a joint venture with Yahoo. Here comes the Yahoo exodus. TechCrunch reports that Bradley Horowitz, head of Yahoo's advanced technology division, has left to go to Google. This news landed as Yahoo was laying off about 1,000 workers, including one that Twittered the event.

Wall Street updates its Yahoo scenarios. Citigroup analyst Mark Mahaney updated his probability charts: Here are the scenarios:

  • Yahoo rejects Microsoft, which bids higher. Deal happens. 55 percent probability.
  • Another bidder emerges and buys Yahoo. 5 percent probability.
  • Microsoft-Yahoo deal blocked by regulators. 10 percent probability.
  • Yahoo outsources search with Google, forges ad pact. 30 percent probability. Mahaney says the Yahoo-Google pact is more likely than Wall Street thinks.

And that's it for today's Microhoo installment. Tune in tomorrow for more rumors, speculation and news nuggets that don't amount to all that much. Why? Microsoft will up its bid for Yahoo and seal the deal.

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