Microsoft, Yahoo! deal suddenly heats up

Sunnyvale, Calif -- The dynamics shifted dramatically in U.S. Internet giant Yahoo! Inc.'s efforts to head off a take-over bid from Microsoft Corp.

Robert Murdoch's News Corp. -- the world's largest media company -- is in discussions with Microsoft -- the world's largest software company -- to put together a combined bid that may increase Microsoft's rebuffed $44.5 billion January offer for Yahoo!, The New York Times reported.

Simultaneously, Yahoo! has begun counter-moves of its own.

Yahoo! is working on a deal to buy most of AOL from Time Warner, The Washington Post reported.

Yahoo! has also worked out a two-week deal with Google to outsource a core service to the world's biggest Internet company.

In a two-week test, Yahoo! will use Google's search advertising system to place ads next to Yahoo! Internet searches.

Microsoft quickly denounced the idea as a violation of anti-trust laws.

"Any definitive agreement between Yahoo! and Google would consolidate over 90 percent of the search advertising market in Google's hands," the company said in a statement.

Senate subcommittee on Antitrust, Competition Policy and Consumer Rights Chairman Herb Kohl, D-Wis., said he would be "following closely," the deal between Yahoo! and Google, the Times reported.

Copyright 2008 by United Press International.