- The Washington Times - Friday, May 4, 2007

10:08 a.m.

NEW YORK (AP) — Microsoft Corp. is resuming its pursuit of search engine operator Yahoo Inc. that could help it better compete with Web search leader Google Inc., published reports said today.

Yahoo shares surged more than 17 percent in premarket trading.

The New York Post reported today that Microsoft has asked Yahoo to enter formal negotiations for an acquisition that could be worth $50 billion. Yahoo’s market capitalization was about $38 billion on Thursday.

The Wall Street Journal said executives of the two companies are looking at a merger or some other kind of matchup and said the talks appear to be early-stage discussions. It said the companies explored the idea of combining last year but the talks led nowhere.

The newspaper reports each cited unidentified people familiar with the situation.

Microsoft is feeling increasing pressure to compete with Google, which plans to beef up its portfolio with a $3.1 billion purchase of online advertising company DoubleClick Inc.

Microsoft currently trails both Yahoo and Google in the lucrative and growing business of Web search.

Google won a search advertising deal with AOL in 2005 that the Post said Microsoft wanted. In addition, Google is developing Web-based software that directly competes with Microsoft Office.

The Post story said Microsoft and Yahoo have held informal talks over the years and said Microsoft’s latest approach to Yahoo signals increased urgency.

Earlier this week, Yahoo said it would buy 80 percent of advertising exchange Right Media for $680 million, increasing its stake in that company to full control.

Yahoo shares surged $5, or 17.7 percent, to $33.18 in premarket trading, while shares of Microsoft fell 28 cents to $30.69.

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