The question of Yahoo's fate has just gotten a good deal more complicated. Three days after Microsoft CEO Steve Ballmer presented Yahoo with a three-week ultimatum and the threat of a hostile takeover, Bloomberg reports that Yahoo is now in talks with AOL over a potential partnership.
According to a tipster with "knowledge of the talks" quoted by Bloomberg, a Yahoo-AOL deal would see Yahoo take control of AOL, receive an investment from Time Warner (AOL's parent company), and sell a 20% stake in the resulting entity. As part of the deal, Yahoo would also be able to "buy back billions of dollars in stock." That said, investors and analysts seem dubious that a deal with AOL would really be in Yahoo's best interest. Mike Holland, Chairman of investment firm Holland & Co., told Bloomberg, "The AOL-Yahoo thing reminds me of two men drowning, both grabbing on to each other."
Meanwhile, the New York Times reports that News Corp. and Microsoft are currently in talks over the possibility of a joint bid for Yahoo. The Times says such a bid would see Yahoo, MSN, and MySpace join forces to make "a behemoth that would upend the Internet landscape." However, an anonymous person involved in the talks told the paper that Microsoft and News Corp. are still negotiating, and that "there's a long way to go before anything is definite."