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Quick Hits: Microsoft-Yahoo Deal Gets Messy

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Brief scrutiny of today's headlines.

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The saga that is Microsoft's (MSFT) bid for Yahoo(YHOO) keeps getting more interesting.

Microsoft wants to buy Yahoo for its online eyeballs, even though neither firm is really sure how to monetize them. Yahoo, for its part, wants to remain independent, and is scrambling to find another suitor. News Corp. (NWS) had considered an outright bid for Yahoo in response to Microsoft's overture, but passed.

The Wall Street Journal now reports that Microsoft is retooling its strategy to include News Corp. in the acquisition. The Journal also says Time Warner's (TWX) AOL division is speedily crafting a deal to merge its online operations with those of Yahoo. Yahoo hopes to remain independent by finding a strategic partner.

Yahoo is also contemplating a deeper relationship with rival Google (GOOG) to monetize its massive user base. The partnership could be key in Yahoo's Board of Directors' efforts to convince shareholders it still holds value as its own entity.

Regardless of how the deal turns out, the real winner will be the investment banks. Advisory bills will run well into the eight figures. Morgan Stanley (MS) and Blackstone (BX) are advising Microsoft, while Yahoo has Lehman Brothers (LEH) and Goldman Sachs (GS) in its corner.

The credit crunch is starving investment banks for cash; who knows what they'll cook up for this twisted deal.

For more on News Corp., check out Hoofy & Boo's always astute report.


No positions in stocks mentioned.

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