The Wall Street Journal reports that Microsoft is talking to Time Warner Inc. and News Corp., among others, about joining it in a deal that would effectively lead to Yahoo's breakup. Microsoft, along with other allies like Time Warner Inc. and News Corp., each buy a piece of Yahoo! Inc. Microsoft gets the search business, and the others get bits and pieces of other Yahoo assets.

Yahoo's employees are jumping ship, but reports coming in now indicate that its not just a 'natural flow', but has been triggered and is being actively encouraged by certain actions on the part of both Yahoo & Microsoft, and I'm not talking about the ill-fated buyout.

Yahoo! Inc. has just announced that talks between it and Microsoft Corp. for a full or search limited buyout by Microsoft have ended with Microsoft refusing to go for a full buyout of Yahoo! Inc. and Yahoo refusing a sale of its search division to Microsoft. Excerpts from the press rlease below, and more updates coming later.

So Yahoo! Inc. posted an FAQ on its internal intranet site for Yahoo! employees on June 10, 2008, explaining its position and thinking with regards to the 'Change in Control Employee Severance Plans'. The full letter, along with some additional answers from me.

Icahn states that he will terminate the faux severance plan if he gains control and asks Bostock to "stop dancing around the subject and publicly offer to sell the company to Microsoft for $34.375 per share and promise to cooperate completely."

Yahoo!

Delaware Chancery Court Judge issues ruling to unseal court documents realted to a Yahoo shareholder lawsuit. The documents show that Yahoo rejected a $40 per share offer from Microsoft in January. And that Yahoo cooked up a costly severance plan to make a Microsoft takeover unfeasiable.

End of the road for Yahoo! Inc. as a seperate entity and it's time to put your money where your mouth is. Here's what's going to happen pretty soon. The Yahoo Board and Microsoft will announce a Microsoft buyout of Yahoo for either $34 or $35. Why now? The Yahoo board meeting isn't till the end of July. Is Yahoo throwing in the towel?

Interesting article by Tim Sweeney.

"I had to laugh when I heard rumors concerning the new Microsoft-Yahoo negotiations. Let’s see, Jerry Yang turned down Microsoft’s (MSFT) original offer because (a) it substantially undervalued the long term prospects of the company, and (b) he wanted to keep the unique culture and spirit of Yahoo (YHOO)."

WSJ reports that Carl Icahn's Yahoo bid is rapidly gaining support from exisiting and new shareholders. The list of supporters now includes Texas billionaire T. Boone Pickens, Daniel Loeb's Third Point LLC, and, as mentioned in the previous update, John Paulson of Paulson & Co.

John Paulson, King of the hedge fund managers last year with a 500%+ return generated from shorting sub-prime, has a new target..Yahoo.

Microsoft said on Sunday it has proposed an alternative deal to Yahoo, rather than a full acquisition, in a move that could save the web pioneer from fighting a proxy battle with financier Carl Icahn.

The only reason Google agreed to do it was to try and help Yahoo fight off the advances by Microsoft. Since Microsoft has now withdrawn from the offer (at least on paper), the basic reason for Google having to help Yahoo is no longer there. Also, WSJ report says that people at Google are worried about Google having to share advertising related data with Yahoo.

An article and commentary on the rumored Microsoft/Facebook merger talks.

After Microsoft withdrew its $33-a-share offer for Yahoo on Saturday, the question was how far Yahoo’s stock would drop. On Monday morning, the markets gave an initial answer: plenty.

Shortly after 10 a.m., Yahoo’s shares were off nearly 20%, at $23.92, down from the close of $28.67 on Friday — a day when the companies were said to be escalating their talks on a merger.