Source: Yahoo in informal talks with Microsoft

Yahoo's resolve appears to be softening, yet whether such discussions will lead to a deal remains to be seen, says source familiar with the talks.

Dawn Kawamoto Former Staff writer, CNET News
Dawn Kawamoto covered enterprise security and financial news relating to technology for CNET News.
Dawn Kawamoto
2 min read

Microsoft and Yahoo are holding informal merger discussions, marking a shift from the "radio silence" that previously existed between the two companies, according to a source familiar with the talks.

A lot has changed over the past two weeks, compared with February 1 when Microsoft issued its unsolicited buyout bid for Yahoo, which initially valued the company at $31 a share.

"Yahoo has shown some willingness to have a conversation and talk," said the source on Wednesday. The source noted the Redmond giant has since come to the conclusion it may never get a formal rejection letter from Yahoo.

Whether these informal talks will lead to a deal has yet to be seen, added the source.

The recent events add further clarity to comments Microsoft CEO Steve Ballmer made at CeBIT a couple weeks ago, in which he said "'there is a range of dialogue' for both companies about the proposed takeover," as cited in an Associated Press report.

Another source close to Microsoft's Yahoo buyout efforts, however, cautioned Thursday that if the talks had reached a substantive level, Microsoft would have disclosed it publicly.

Last week, Yahoo announced it would extend the deadline for investors, including Microsoft, to nominate an opposition slate of directors, in an effort to avoid a proxy fight with the Redmond giant while it explored its options.

Then on Monday, one of Yahoo's possible white knights, News Corp., indicated it had no interest in entering into a bidding war with Microsoft. And on Tuesday, Time Warner's CEO noted he wouldn't rule out a deal with the company's AOL operations and Yahoo, noting in sweeping terms that Time Warner would consider anything that would make AOL stronger. AOL, however, announced Thursday it plunked down $850 million--in cash--for social-networking site Bebo. And while the Bebo acquisition doesn't necessarily mean Yahoo is no longer of interest to AOL, Time Warner has less money to burn post-Bebo.

Representatives from both Microsoft and Yahoo declined to comment.

And while the software giant could pounce and go hostile at any moment--via a proxy fight, exchange offer, or both--Microsoft-Yahoo observers should be ready to park it on a bench for a while.

Microsoft has set no internal deadline of when it's ready to say enough is enough, said the source.

"Sure there has been some frustration in Redmond over the pace, but this is a marathon and not a sprint," said the source.

CNET News.com's Ina Fried contributed to this blog.