Microsoft Seeks Allies for Yahoo Breakup?

According to the Wall Street Journal, Microsoft has approached Time Warner and News Corp. about partnering to buy Yahoo - and part it out.

The Wall Street Journal and other media outlets are reporting (subscription required) That Microsoft has approached media companies Time Warner and News Corp. about going in together on a deal to buy out struggling Internet company Yahoo—and then divide the spoils amongst themselves in a series of moves that would effectively dismantle Yahoo. The Wall Street Journal describes the talks as “preliminary” and unlikely to result in any immediate deal; other sources confirm portions of the story but hesitated to even describe the talks as “formal.”

If true, the activity would just be the latest chapter in Microsoft’s ongoing saga to take over—or take down—Yahoo, one of the most-recognized names on the Internet and the number two Internet search engine on the planet…although it’s still a very distant number two behind Google. Earlier this year Microsoft made an unsolicited takeover offer for Yahoo, which was quickly rebuffed. Microsoft eventually raised its offer but Yahoo again refused—an action which has led to a revolt among Yahoo’s investors, led by billionaire Carl Icahn.

If the three companies were to go in together to buy Yahoo, Microsoft would want to walk away with the company’s Internet search business, which the Redmond software maker apparently still sees as a key asset in competing with Google both on the Internet search front and in the search advertising business. Yahoo’s other businesses would presumably be divvied up amongst News Corp and Time Warner—who may have an interest in things like Flickr and del.i.cio.us, but who may not be as interested in things like Yahoo Mail, Yahoo Messenger, and efforts like the Yahoo toolbar.

News Corp. owns social networking powerhouse MySpace; Time Warner owns AOL, although the company has considering separating itself from AOL, which has been reworking itself as an online advertising company offering free online services to consumers.