Often the source of a rumor is as important as the rumor itself. Some sources simply have more credibility than others. Reuters has reported that talks to make either Microsoft Corp. (NASDAQ: MSFT) or Yahoo! Inc. (NASDAQ: YHOO) the new owner of Time Warner (NYSE: TWX)'s AOL are heating up.

Now, The Wall Street Journal say that negotiations between Time Warner management and Microsoft brass have become more urgent.

The paper writes, "Microsoft Corp., seeking an alternative to a deal with Yahoo Inc., is planning to meet executives from Time Warner Inc.'s AOL today to advance discussions on a possible tie-up."

Of course, the rumors has the strength of making sense. For Microsoft or Yahoo! to get bigger in display advertising and have more online consumers using their search services, AOL is the only other really large internet property available. And Time Warner management has strongly hinted that it would like to find a home for the portal company.

One thing is certain. Yahoo! will not be AOL's buyer. The likely proposal from Yahoo! would be for it to buy AOL by giving Time Warner a big piece of ownership in the combined company. That would leave TWX with perhaps a third of the public stock in Yahoo. Selling off a stake of that size would be nearly impossible. Time Warner might as well keep AOL under those circumstances. Also, Yahoo! management has been so maladroit at running its own affairs that Time Warner should have very little confidence that the group could run a larger operation.

Time Warner will look at Microsoft as AOL's buyer for two key reasons. First, it has cash; and second, it will not allow AOL to fall into Yahoo!'s hands to give the. No. 2 search company the advantage of improving its position in that part of the online industry.

Douglas A. McIntyre is an editor at 24/7 Wall St.

More rumors AOL will be bought by Microsoft, maybe originally appeared on BloggingStocks on Wed, 16 Jul 2008 15:18:00 EST. Please see our terms for use of feeds.

Several media outlets are reporting that Yahoo! (NASDAQ: YHOO) will today reject Microsoft's (NASDAQ: MSFT) offer for the firm as being too low. According to The New York Times, "Yahoo's response is expected to reject negotiations and explain why Yahoo's board believes the current offer price is too low."

The Yahoo! board certainly has guts, but does it have brains? Based on the company's performance last year and the likelihood that it will have only a modest Q1 performance, it is hard to imagine on what basis it can make its valuation case. While the firm may hope it can get a deal with another internet firm, that is far from certain.

Microsoft has indicated that it will lower the price on the deal, but that may give the Yahoo! board more ammunition to make its valuation case. While the company may not be worth more than the $31 offer, a lower offer of, say, $27 might allow Yahoo! to argue that the price is, indeed, too cheap.

Yahoo!'s biggest problem now is the huge distraction that the deal makes for the company's board and senior management at a time when they cannot afford to allow any missteps in the firm's performance.

Douglas A. McIntyre is an editor at 247wallst.com.

Today Yahoo! (YHOO) to reject Microsoft (MSFT) offer as too low originally appeared on BloggingStocks on Mon, 07 Apr 2008 03:57:00 EST. Please see our terms for use of feeds.

Microsoft had Google-like results originally appeared on BloggingStocks on Thu, 25 Oct 2007 17:13:00 EST. Please see our terms for use of feeds.

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