Page last updated at 06:20 GMT, Thursday, 10 April 2008 07:20 UK

Microsoft and Yahoo 'seek allies'

Yahoo sign
Yahoo is desperately trying to avoid being bought out by Microsoft

Microsoft and Yahoo are both reported to be looking for alliances to try to influence their takeover battle.

Newspapers reported that Microsoft is considering making a joint bid for Yahoo with News Corp, to add its MySpace networking site to the mix.

At the same time, Yahoo is reported to be discussing merging with AOL to avoid Microsoft's $44.6bn (22.6bn) offer.

It came after Yahoo and Google said they were having a two week trial of an advertising space-sharing experiment.

During the pilot, Google will be able to place ads alongside 3% of search results on Yahoo's website.

Hostile offer

The terms of the combined Microsoft and News Corp bid for Yahoo are still being discussed, according to the New York Times, but the idea would be to combine three of the world's most visited websites: MySpace, Yahoo and

News Corp had previously discussed working with Yahoo to see off Microsoft's offer.

Yahoo is now looking to Time Warner's AOL to keep out of Microsoft's hands, according to the Wall Street Journal.

It reported that the deal would involve Time Warner making a cash investment for 20% of the merged firm, which Yahoo could then use to buy back shares.

Last week, Microsoft threatened to make its offer for Yahoo hostile and to reduce the amount it is prepared to pay if Yahoo's directors did not respond by 26 April.

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