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What's got Microsoft and Yahoo talking?

Source tells CNET News.com that preliminary merger discussions are under way. Yahoo's upcoming earnings report may be one reason for the shift.

With Yahoo's potential dance partners all stepping away, it's not surprising that Yahoo is finding it harder to completely ignore the folks in Redmond. A source familiar with the talks has told CNET News.com that the two sides are having some preliminary discussions.

Another factor that could be coming into play is the fact that Yahoo has quarterly earnings next month. Given that the economy appears to be slowing, there is reason to think that Yahoo may have less than glowing things to say, an issue that could put pressure on Yahoo's stock. That could give Microsoft more incentive to lower its $31-a-share bid, rather than raise it.

Rather than lower its bid, Microsoft could also maintain its bid in the face of any disappointment from Yahoo--further weakening Yahoo's argument to shareholders that such a bid was not a fair offer, a case that many analysts say is already a tough one. But April 22 is a long way off and a deal could well happen before that, assuming Yahoo decides to truly come to the bargaining table.

Before we get too far ahead of ourselves, though, another source close to Microsoft's Yahoo buyout efforts cautioned Thursday that if there are any discussions, they aren't very far along, or Microsoft would have disclosed them.

Still, you can't reach a deal if you aren't talking, so any talking would appear to be a step in the right direction for Microsoft.