MICROSOFT HAS reopened negotiations with Yahoo but is now seeking to acquire just part of its business rather than the $44.6 (€22.55) billion outright purchase it proposed in February.
The software giant is believed to be interested in Yahoo's search and online advertising business, a market dominated by Google. Industry watchers are suggesting that Microsoft will also make an outright bid for the social networking site Facebook and combine it with its other internet interests.
Last year, Microsoft took a 1.6 per cent stake in Facebook, which valued the four-year-old company at $15 billion. Earlier this month the Wall Street Journal reported that bankers representing Microsoft had approached Facebook, sounding it out on a takeover.
Speaking in Japan yesterday, Facebook founder Mark Zuckerberg seemed to rule out a sale, saying the history of the company showed that it wanted to remain independent.
It is being reported in Silicon Valley that Microsoft and Yahoo are in negotiations and that a deal could be concluded as early as this week. If successful, the move would make Microsoft the second-largest provider of internet search services behind Google. It would also boost its position in the €40 billion online advertising market.
The software giant issued a statement late on Sunday night which stated: "Microsoft is considering and has raised with Yahoo an alternative that would involve a transaction with Yahoo but not an acquisition of all of Yahoo."
The Microsoft statement made specific reference to improving and expanding "its online services and advertising business".
Yahoo responded by saying it remains "open to pursuing any transaction which is in the best interest of our stockholders".
In a leaked memo to Microsoft staff from Kevin Johnson, a senior executive responsible for Windows and online services, he admitted that Microsoft was "not where we want to be in this business yet and we've been in this position longer than we'd all like".
Mr Johnson also said Microsoft would tomorrow announce a "major new initiative" related to its search business at a conference on online advertising it is hosting.
According to digital tracking firm ComScore in March, Google accounted for 59.8 per cent of all internet searches in the US, followed by Yahoo with 21.3 per cent, and Microsoft with just 9.4 per cent. In Europe, Google's lead is even stronger, with 79.2 per cent of all searches. Yahoo and Microsoft both have about 2 per cent of the European market.
