The business stories that matter, by Fortune's Colin Barr
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May 19, 2008, 7:36 am

New chess match for Microsoft, Yahoo

So far, so good for Carl Icahn’s big bet that Microsoft (MSFT) and Yahoo (YHOO) will go back to the table. Yahoo shares rose 1% in premarket trading Monday, a day after Microsoft said it has proposed a new deal “that would involve a transaction with Yahoo but not an acquisition of all of Yahoo.” In response, Yahoo reiterated that it doesn’t want to be acquired but remains “open to pursuing any transaction which is in the best interest of our stockholders.”

Icahn last week said he has taken a big stake in Yahoo and sent the company’s board a letter questioning its failure to bring Microsoft’s previous $33-a-share bid to shareholders. Joining Icahn in wagering that Yahoo shares will head higher is hedge fund manager John Paulson, whose Paulson & Co. took a 50 million-share stake in Yahoo in the first quarter. Coming weeks will show whether restive shareholders can apply enough pressure to make Yahoo take action.

Any deal between Microsoft and Yahoo is a winner for Google. While these guys stay distracted, Google continues to gain market share. If the deal get’s inked it will be a disaster for both Yahoo and Microsoft. <a href=”http://tmccune.blogspot.com/2008/05/google-wins-on-any-microhoo-deal.html” More about that

Posted By Tony, Atlanta GA : May 19, 2008 9:15 am
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Colin Barr covers business and finance for Fortune.com. Previously he was an editor at TheStreet.com and author of the weekly Five Dumbest Things on Wall Street column, and an editor at Dow Jones Newswires.
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