The Yahoo-AOL deal would involve Time Warner folding AOL into Yahoo and making a cash investment in return for about 20 percent of the combined company. This, along with a multi-billion dollar stock repurchase as well as an advertising tie-up with Google, is part of a threefold plan by Yahoo to present shareholders with an alternative to Microsoft's unsolicited offer.
Microsoft is not standing still, though. The software giant is reportedly considering stepping up its efforts to acquire its rival by teaming up with Rupert Murdoch's News Corporation on a joint bid for Yahoo. Where all this will go remains to be seen, but at the least, Yahoo's latest efforts could help it demand a higher price from Microsoft.