US software giant Microsoft and web portal Yahoo have revived talks to explore a merger or alliance, The Wall Street Journal reported on Friday.
NEW YORK: Microsoft has stepped up its pursuit of a deal to buy Yahoo, two newspapers reported on Friday, as the two companies re-enter talks to strike a deal and fend off a common competitor in Web search leader Google.
Yahoo shares jumped 17.96 per cent to $33.24 in Nasdaq trading on Friday, while Microsoft shares fell 1.26 per cent to $30.58.
The two companies have held informal talks over the years, but the latest approach comes as Microsoft seeks a deal to counter Google's rapid growth.
"It's been talked about for a long time, ever since Google came into the picture. I can't imagine a more perfect deal," said Peter Lobravico, vice president of risk arbitrage sales trading at brokerage Wall Street Access.
"You can't find a stronger buyer than Microsoft and while it would spur a lot of political and regulatory noise, everyone knows in the end that the deal would go through."
Analysts often dismiss a takeover of Yahoo by Microsoft since the two companies have such different cultures and Microsoft usually prefers to buy small companies with interesting technology.
The New York Post reported early on Friday that Microsoft made an offer to buy Yahoo a few months ago, but Yahoo spurned the advances. The paper, putting a price tag of $50 billion on a Yahoo takeover, said that discussions continue between the two companies.
Investment bank Goldman Sachs is advising on the process, the paper said. The bank declined to comment. One banking source said that investment banks had been pitching Microsoft on the idea of buying Yahoo for months.
The Wall Street Journal followed with its own story, saying that the two companies are in early-stage talks about a merger or some kind of link-up.
The renewed talks are a sign of Google's power, the Journal said, and are also an indicator of problems with in-house efforts at Yahoo and Microsoft. A deal could help Microsoft attract advertisers to its online businesses.
"We've been a significant believer in a Yahoo-Microsoft combination (because) both Yahoo and Microsoft both need to create a bigger presence (in advertising) to compete with Google," said Marianne Wolk, an analyst with Susquehanna Financial Group.
Google agreed to buy DoubleClick Inc. last month for $3.1 billion, accelerating a push into the graphic ad market. Google beat out Microsoft and Yahoo to win the deal, sources said.
However, a Yahoo spokeswoman declined to comment on Friday on the issue.
"We do not discuss rumours or speculation," Yahoo spokeswoman Joanna Stevens said.
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