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News Corp cools interest in Yahoo deal

The media giant has dropped its interest in doing a deal with the internet company, removing an important obstacle in Microsoft's plans for a potential takeover.

By Elizabeth Wolfe, 11 Mar 2008 at 16:50

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Although the road to acquiring Yahoo has been a bumpy one, it looks like Microsoft now has one less obstacle to face; News Corporation.

Rupert Murdoch has announced his media conglomerate has no plans to make an offer for the internet search engine that Microsoft so highly covets.

"We're not going to get into a fight with Microsoft, which has a lot more money than us," Murdoch, chief executive of News Corporation, said late yesterday.

Yahoo approached News Corporation in an effort to avoid accepting Microsoft's unsolicited $44.6 billion (£22.3 billion) bid, which executives at Yahoo believe undervalues the company. While there were once talks of somehow merging the search engine site with News Corporation's popular social networking site MySpace, these seem to have wilted.

If and when the Microsoft acquisition of Yahoo finally happens, the Windows maker will not immediately merge the technology platforms of the two companies.

Microsoft's chief software architect, Ray Ozzie, explained in an interview with the Financial Times that it would be important to gradually unite the two companies, instead of rushing into a complicated merger of services and brand names.

"Technology companies, if they dive in and just smash things together for smashing them together's sake, it's reckless, it's just simply reckless," Ozzie said.

While Microsoft hopes acquiring Yahoo will strengthen its defence against internet giant Google, Ozzie recognises that the results would not be immediate or come easily.

"I'm not in any way unrealistic about the challenges that would confront us. They have a number of different types of technologies. They have their own corporate culture," Ozzie said.

Despite the challenges that accompany merging two technology companies as well-established as Yahoo and Microsoft, executives at the Windows maker maintain their belief that the acquisition would be worthwhile.

By completing the merger slowly, Microsoft would be able to avoid alienating Yahoo's users. This would mean a smooth transition for Yahoo's services and advertisers, but most likely at a cost of delayed financial benefits for shareholders.