[quote]SAN FRANCISCO/NEW YORK (Reuters) - Yahoo Inc continues to work toward finding an alternative to being bought by Microsoft Corp, a day after the software giant threatened to lower its $42.4 billion bid.
Talks between Yahoo and Time Warner Inc’s AOL division about an alliance have intensified, according to a person familiar with the matter.
Earlier, Yahoo also held talks with News Corp, but these talks have cooled, said the person, who was not authorized to speak on the record about the matter.
In a letter to Yahoo’s board on Saturday, Microsoft Chief Executive Steve Ballmer set a three-week deadline to reach a deal, or see Microsoft cut its bid and mount a proxy campaign against Yahoo’s board.
Yahoo shareholders and analysts say Yahoo’s options fall into two major categories; find an ally to help demonstrate Yahoo is worth more as an independent player or surprise the market with a strong show in its quarterly results.
The consensus on Wall Street is that no “white knight” will emerge to whisk Yahoo away from Microsoft and its proposed $31 a share cash-and-stock offer currently valued at $42.2 billion.
“Microsoft is looking a bit frustrated. It is a pattern of stalling on the part of Yahoo,” said Sanford C. Bernstein analyst Jeffrey Lindsay, who added that Yahoo’s unwillingness to negotiate made it increasingly likely Microsoft will go hostile.[/quote]