Yahoo stock rises on news of renewed Microsoft talks

Yahoo's stock, which had plummeted since it spurned Microsoft's overtures, leading investors and shareholders to berate Yahoo management for letting the opportunity pass by, has been temporarily arrested on reports that it is reconsidering its recent decision to fall into the arms of online search leader Mountain View-based Google instead of Redmond-headquartered Microsoft.

Yahoo shares went as far as five per cent up yesterday to $23.71 before ending the day on $22.04, still a considerable upsurge of 2.8 per cent, and its largest one-day gain in two weeks. This marked a reversal in the stock's fortunes since it started a slide following the Yahoo-Google tie-up. (See: Yahoo strikes $800-million ad deal with Google, ends talks with Microsoft)

When it embraced Google, Yahoo terminated talks with Microsoft about a sale of the entire company as well as a more limited deal focused on Yahoo's search engine. That led to a 16-per cent drop in Yahoo's market value, making it even harder for Yahoo board's to justify its decision to turn down Microsoft's last takeover offer of $33 per share. Yahoo CEO Jerry Yang had sought $37 per share.

The backlash to the Google alliance may have prodded Yahoo to rekindle talks to sell its search operations to Microsoft as part of a $9-billion deal.

Technology news site CNet.com and the blog Silicon Alley Insider both reported Yahoo and Microsoft are once again exploring a more limited deal, perhaps at a higher price than was previously discussed. The reports cited unnamed people familiar with the discussions.

This news may be temporary respite for beleaguered CEO Yang as faces hostile shareholders at the company's annual general meeting on 1 August. Upset by Yahoo's handling of the Microsoft negotiations, billionaire investor Carl Icahn has nominated an alternate slate of directors and promised to fire Yang as CEO if he wins control of the board.(See: Icahn seeks FTC clearance to acquire $2.5 billion worth Yahoo! stock; threatens proxy fight)