Microsoft Weighs Next Move

Microsoft, positioning itself for a possible new run for Yahoo’s web search business, has approached other media companies in recent days about joining it in a deal that would effectively lead to Yahoo’s breakup, reports The Wall Street Journal.

Microsoft has held discussions with Time Warner and News Corp, among others, people involved in the talks told the newspaper.

In the past, Microsoft has floated an arrangement under which it would acquire Yahoo’s search business and another partner, such as News Corp’s MySpace or Time Warner’s AOL, would combine forces with what remained of Yahoo.

Meanwhile, The Financial Times reports that Microsoft yesterday announced the purchase, reportedly for about $100 million, of Powerset, a San Francisco company that has developed a promising, and controversial, new internet search tool.

Aside from Microsoft's flirtation in Yahoo, insiders do not believe that talks are as serious as they were back in April, according to the WSJ. However, talks have resumed after learning of Yahoo's talks with other potential partners.

News Corp. has also been in the mix, although no deals are believed to be in the making. News Corp. owns Dow Jones & Co., published of the The Wall Street Journal.

Microsoft could take Yahoo's search business and News Corp. would integrate its MySpace social-networking business into the rest of Yahoo, according to the WSJ. Yahoo would have to pay considerable taxes to sell its search business and would need a major stake in the combination.

Time Warner, Yahoo, News Corp., and AOL are all ooking to align themselves to compete with Google. Yahoo shareholders would prefer a deal with Microsoft, as Microsoft would be able to pay with cash, as opposed to a complicated asset exchange if dealing with the other companies.

The Justice Department is reviewing the Yahoo and Google transaction of having Yahoo run some search advertisements sold by Google on its sites in exchange for some of the revenue.