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Reports: Microsoft and Yahoo Actively Negotiating Merger Deal

Shares of Microsoft closed just shy of 7 percent higher on Friday May 2 based on new speculation that Microsoft and Yahoo are now actively negotiating to seal a deal.

Both the New York Times and Wall Street Journal are reporting that the two companies are in serious negotiations, looking to break a stalemate that effectively began three months ago after Microsoft launched its unsolicited bid to acquire Yahoo. Microsoft is arguing that a combination with Yahoo would be the best bet to take on Google

According to both reports however, sources close to the talks caution that a deal may not be struck by end of day today, and the possibility remains that Microsoft could decide to walk away.

What appears to be the biggest stumbling block is the price Yahoo officials believe Microsoft should pay to buy the company.

According to sources quoted by the Wall Street Journal report, Microsoft was now willing to pay as much as $33 per Yahoo share, up from its original bid of $31 per share, but many Yahoo shareholders are looking for an offer in the $35 to $37 a share range. Considering the devaluation of Microsoft's share price since it's inital bid, some are arguing that the reported raised bid to $33 would have valued the deal as high as $35 a share at the time.

About the Author

Ed Scannell is the editor of Redmond magazine.