YAHOO HAS ratcheted up its efforts to improve its negotiating position in the face of an unsolicited takeover bid from Microsoft, amid signs that it was edging towards a three-way alliance with Google and AOL that might protect its independence or at least force Microsoft to pay more.
There were also reports that News Corp was in talks with Microsoft about joining in that firm's bid for Yahoo. The talks involve News Corp combining MySpace with the Microsoft and Yahoo internet businesses, according to the reports.
Both News Corp and Microsoft refused to comment.
The game of musical chairs among the titans of the internet follows two years of on-again, off-again talks to engineer industry-reshaping mergers. The flurry of activity came as Yahoo and Microsoft positioned themselves for the endgame in the takeover battle.
Microsoft tried to turn up the heat on Yahoo over the weekend by threatening to take its cash-and-stock offer, currently worth $42 billion (€26.7 billion), directly to the embattled company's shareholders and hinting that it might even cut the value of its offer.
Yahoo countered by repeating that the offer price was too low and it was pursuing alternatives.
Then, on Wednesday, Yahoo announced the test of a potential advertising alliance with Google. The two-week experiment, due to start next week, will involve Google supplying relevant advertisements alongside a small sample of Yahoo search results.
The test suggested that the two sides were once again discussing an alliance that would involve Yahoo closing down its own search advertising system and outsourcing the work to Google. The idea was discussed last year and again after Microsoft's bid, but Google had appeared to cool on the idea amid concerns it would be blocked by anti-trust regulators.
Microsoft was quick to raise the anti-trust flag. "Any definitive agreement between Yahoo and Google would consolidate over 90 per cent of the search advertising market in Google's hands; this would make the market far less competitive," said Brad Smith, Microsoft general counsel.
