Yahoo, Time Warner discuss deal to thwart Microsoft bid

Yahoo, who last month rejected Microsoft’s $44 billion bid to acquire the firm, may be looking east for its future as it has reportedly stepped up talks with Time Warner to create an alternative to Microsoft’s hostile takeover.

Under a possible deal, Yahoo would acquire Time Warner’s AOL in exchange for the media conglomerate taking a minority stake in the combined company, according to unnamed sources quoted by the Wall Street Journal. Although the combination would create an internet company with a very large audience, it would hardly create any challenge to Google in the search advertising space, thus it is not clear whether Yahoo’s shareholders would find it an acceptable alternative. Meanwhile, Yahoo is also said to be talking with News Corp. about the possibility of combining MySpace and other online properties with Yahoo.

All of these potential deals are being reported as Microsoft is allegedly preparing to escalate its takeover fight for Yahoo by starting a proxy contest ahead of Yahoo’s upcoming annual shareholder meeting – though in an effort to delay that move, Yahoo appears to have postponed the meeting in order to buy some time to continue seeking out and evaluating alternatives.