News Corp, AOL Play Role In Yahoo Drama

Additional Internet players join the Microsoft bid-for-Yahoo fray, with Rupert Murdoch siding with Steve Ballmer while Jeff Bewkes pairs with Jerry Yang for the endgame battle.

Microsoft's ultimatum to Yahoo to either start negotiating or face a hostile fight for control of its board served as a catalyst to a flurry of activity over the next several days. Yahoo told Microsoft to take a hike again, while making a Wall Street Journal said Yahoo and AOL are working on a deal to combine their operations, and stick a thumb in Microsoft's eye.

"The AOL-Yahoo deal under consideration would include the repurchase of some Yahoo shares at a price above Microsoft's offer. Taken together with a possible search advertising pact with Google, the plan could give Yahoo an alternative to a Microsoft takeover," the Journal said.

But wait! Microsoft's initial proposal to buy Yahoo may get a boost from News Corp's magnate, Murdoch. The Which Internet monolith will you prefer? Yahoo, MSN, and MySpace/Fox Interactive, or AOL/Yahoo? One has to think Yahoo shareholders are rooting for the former, as Murdoch's backing means a higher price per share for the acquisition.

Yahoo itself has said they are not against a deal with Microsoft. They are just angry that market forces drove the price of Yahoo shares down to a point where they feel Microsoft would get a tremendous bargain with its initial proposal.

If Murdoch makes more money available for Microsoft's proposal, Yahoo risks a lot more lawsuits from shareholders if they reject a renewed offer out of hand.