Microsoft to Purchase Yahoo? [Updated]

Reuters reports on rumors that have started circulating that Microsoft is in talks about acquiring Yahoo Inc.

Investment bank Goldman Sachs is advising on the process, the paper said. The bank declined to comment. One banking source said that investment banks had been pitching Microsoft on the idea of buying Yahoo for months.

Yahoo's stock has jumped up almost 18% in response to the rumors. According to the reports, the companies have held "informal" talks over the years, but this latest round comes after increasing competition from Google. Google recently acquired online advertising company DoubleClick Inc, which Microsoft was also pursuing. After the deal was made, Microsoft urged U.S. regulators to scrutinize the potential deal on anti-trust grounds.

"The minute you hear Microsoft start arguing against something on antitrust grounds, you know they are desperate and need to do something big," said one [NYPost] source.

While not directly Apple related news, the implications of a Microsoft-Yahoo acquisition would be far reaching.

Update: The Wall Street Journal is stating that the deal is unlikely to happen.

...the merger discussions are no longer active, these people say. The two companies may still explore other ways of cooperating.

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