Yahoo! (YHOO) chief executive Jerry Yang just can’t catch a break. Not only does the Washington Post say the Justice Department has launched an antitrust investigation into the deal Yahoo recently struck with Google (GOOG), the Wall Street Journal reports that Microsoft (MSFT) is taking another run at the beleaguered Internet portal.

Yahoo stock popped 6% in morning trading on hopes that a deal with Microsoft may be reached.

The government is investigating Google’s agreement to provide search advertising for Yahoo, according to the Post report, and will demand documents from Google, Yahoo, and other large Internet and media companies to determine whether the agreement violates antitrust laws.

When the Google deal was announced, Yahoo said that it would undergo a voluntary Justice Department review, and the company contends the request was to be expected. However, the Post, citing sources close to the case, says that the DoJ has launched a formal investigation, which signals that the department may have found some cause for concern. Lawyers tell the paper that the kind of legal requests being issued by the Justice Department in this case are not used for routine matters.

Meanwhile, the WSJ says Microsoft has held discussions with Time Warner (TWX) - the parent company of Fortune.com - and News Corp. (NWS) about working together to effectively carve up Yahoo. In the past, Microsoft has floated the idea of taking Yahoo’s search business while, say, News Corp.’s MySpace or Time Warner’s AOL would take the remains.

This move by Microsoft is the latest in a takeover battle royale that has revealed shortcomings at both companies and raised questions as to whether Yahoo founder Yang is fit to run the company. Shareholders want an agreement of some sort to be reached, but it is clear that both sides remain far apart on what a merger or acquisition might look like. Microsoft has even gone so far as to say that Yang is obstructing any kind of transaction. Activist investor Carl Icahn agrees, saying that Yahoo’s refusal to play ball is hurting shareholders.

The glasnost era has arrived at Microsoft (MSFT). The software giant - which over the years has earned a reputation for not playing nice - put out a press release Thursday morning proclaiming its readiness to collaborate with the rest of the world. Microsoft said it is making changes in its technology and business that aim “to increase the openness of its products and drive greater interoperability, opportunity and choice for developers, partners, customers and competitors.” The company is so eager to pound home the point that the words “open” and “openness” appear 16 times in the release.

“These steps represent an important step and significant change in how we share information about our products and technologies,” said CEO Steve Ballmer. “For the past 33 years, we have shared a lot of information with hundreds of thousands of partners around the world and helped build the industry, but today’s announcement represents a significant expansion toward even greater transparency.”

Tech watchers are skeptical, though. At ZDNet, Larry Dignan writes that the announcment amounts to a pledge not to sue developers of open-source software and wonders, “Is this a Microsoft peace offering that could actually annoy the open source community? After all, the open source community never bought into the idea that Microsoft could and should sue them.” That aside, perhaps Microsoft has realized that its embrace of Yahoo (YHOO) and competition with Google (GOOG) make opening up a necessity, however belated.

Tech hard-chargers want in on the e-mail business. Dell (DELL) agreed Tuesday to spend $155 million to buy MessageOne, a small-business e-mail software company that competes with Google’s (GOOG) Postini and Yahoo’s (YHOO) Zimbra. “MessageOne brings to Dell world-class technology and talent that will broaden Dell’s configurable services offerings,” Dell said Tuesday morning. As it happens, MessageOne is run by Michael Dell’s brother Adam - an apparent conflict of interest Dell dealt with in part by hiring Morgan Stanley to offer up a so-called fairness opinion and by having Michael Dell and his wife agree to donate their proceeds to charity.

Elsewhere, there is talk of a Google play for Plaxo, the former LinkedIn rival backed by Sequoia Capital’s Michael Moritz. The Plaxo deal chatter taps into a Silicon Valley debate that Fortune’s Josh Quittner takes note of: “Who really owns your address book?” Many companies believe you do - but Microsoft (MSFT), surprise surprise, isn’t among them. It has been trying to sell third parties access to Hotmail users’ contact lists, Quittner reports. The company insists that it’s doing so not for selfish reasons but to protect users’ security. Maybe it’s time for a fairness opinion on that practice.

So far there’s no sign of how Yahoo (YHOO) might react to Microsoft’s (MSFT) unsolicited $44.6 billion takeover bid. But can the struggling Internet giant really afford to say no, as it did last year? Yahoo! shares have dropped 40% over the past three months as the company falls further behind rival Google (GOOG) in the online advertising business. This week’s disappointing earnings reports from across the tech sector show that everyone is having trouble adjusting to the reality that a recession is likely to pressure ad spending in 2008. But given Yahoo’s presumed preference to stay independent, where might CEO Jerry Yang turn?

So far his options appear to be rather limited. Venture capitalist Fred Wilson points out on his blog that at the offer price, the only plausible competing bids would have to come from strategic buyers in the media business. But News Corp. (NWS), for one, is now digesting its $5 billion acquisition of The Wall Street Journal - and a rival bid for Yahoo stands to be 10 times as big. Private equity players, Wilson points out, are likely priced out of this deal by its sheer size and the fragile state of the debt markets. All this means Yahoo’s board may face the unhappy prospect of trying to squeeze a better offer out of Microsoft, but with precious little leverage.

The news that Microsoft (MSFT) is pursuing an acquisition of Yahoo (YHOO) isn’t making disappointed Google (GOOG) shareholders feel any better. While the $44.6 billion cash-and-stock proposal sent Yahoo shares soaring 60% in early trading Friday, Google shares traded down 8% in the wake of Thursday afternoon’s earnings miss. A Microsoft-Yahoo deal, while far from a certainty right now, could make it even tougher for Google to meet Wall Street’s sky high growth expectations. Meanwhile, it’s clear that the point of the Yahoo acquisition would be to fortify Microsoft for a push deeper into Google’s online advertising turf, even if Microsoft refuses to mention Google by name in its discussions of ad industry dynamics.

“While online advertising growth continues, there are significant benefits of scale in advertising platform economics, in capital costs for search index build-out, and in research and development, making this a time of industry consolidation and convergence,” Microsoft chief Steve Ballmer said in Friday’s press release. “Today, the market is increasingly dominated by one player who is consolidating its dominance through acquisition. Together, Microsoft and Yahoo! can offer a credible alternative for consumers, advertisers, and publishers.” It will be interesting to see how that “one player” might respond to this deal.

Microsoft (MSFT) is offering Yahoo (YHOO) a way out of its misery, but so far Yahoo doesn’t seem to want one. Microsoft said Friday morning it had proposed to buy the struggling Net giant for $31 a share, or $44.6 billion, in cash and stock. The deal would offer Yahoo shareholders a 62% premium to Thursday’s closing price, and combine the forces of two powerful Internet companies that are having trouble on their own competing with Google (GOOG). “We have great respect for Yahoo,” said Microsoft chief Steve Ballmer, “and together we can offer an increasingly exciting set of solutions for consumers, publishers and advertisers while becoming better positioned to compete in the online services market.” News of the bid sent Yahoo shares soaring more than 50% in early action Friday, while Microsoft shares slipped 2%.

Microsoft’s press release indicates that the companies have been discussing some sort of arrangement that would help them combine against Google for two years. But the Redmond, Wash., software giant now believes the competitive situation has deteriorated to the point where only a merger would make sense.

 ”In late 2006 and early 2007, we jointly explored a broad range of ways in which our two companies might work together,” Microsoft says. “These discussions were based on a vision that the online businesses of Microsoft and Yahoo! should be aligned in some way to create a more effective competitor in the online marketplace. We discussed a number of alternatives ranging from commercial partnerships to a merger proposal, which you rejected. While a commercial partnership may have made sense at one time, Microsoft believes that the only alternative now is the combination of Microsoft and Yahoo! that we are proposing.” 

Microsoft’s letter to Yahoo further indicates that a year ago, Microsoft approached Yahoo’s board but was told that “now is not the right time from the perspective of our shareholders to enter into discussions regarding an acquisition transaction.” Given the plunge in Yahoo stock and the prospect of a damaging recession this year, if now isn’t the right time, it’s hard to imagine what is.

It has been too long since anyone speculated that Microsoft (MSFT) could be ready to buy Yahoo! (YHOO). Fortunately, CNNMoney’s Paul LaMonica points out, Thursday brings not one, but two items resuscitating that rumor for the umpteenth time. 

First, the New York Post reports that “sources close to Microsoft say the company is still debating if it should make last year’s informal offer to buy Yahoo! official by going public with its bid.” Then, a note from Cowen & Co. analyst Jim Friedman acknowledges the possibility of a deal, though Friedman puts the chance of a deal at less than one in four.

The Microsoft-Yahoo! rumor has been around for a good long time. Last spring, the Post and The Wall Street Journal reported an informal bid was afoot, though nothing came of it. Then, just after Labor Day, The New York Times noted that the rumor was being revived as idle traders returned from the beach. No doubt the most bracing take on the endless tie-up speculation comes from Eddy Elfenbein of Crossing Wall Street, who explained in May why he had doubted the rumor from the very beginning.

“I was able to see where this story was going,” he wrote, “due to my detailed knowledge of the tech industry, my comprehensive understanding of corporate finance and not being totally retarded.”