News Corp. Enters Yahoo Fray

News Corp. and Yahoo Inc. are in discussions about combining MySpace and other News Corp.-owned online properties with Yahoo, according to people familiar with the matter.

The discussions are aimed at helping Yahoo fend off Microsoft Corp's unsolicited takeover offer, which was initially valued at $44.6 billion. Under the deal being discussed, News Corp. would get a stake in Yahoo which could be more than 20%.

The deal under discussion, which would also include a contribution of cash from News Corp., is a variation of one that has been considered by the two companies several times over the past 18 months. But discussions have previously fallen apart amid disagreements over MySpace's valuation, which affects the size of the stake News Corp. would get in Yahoo. News Corp., which owns Dow Jones, publisher of The Wall Street Journal, is likely to push for MySpace to be valued at between $6 billion and $10 billion, according to people familiar with the matter. Reports of the talks have appeared on Web sites including TechCrunch and Silicon Alley Insider in the past couple of days.

The deal would allow Yahoo to remain independent while giving News Corp. substantial control over a huge array of Internet properties and advertising opportunities. In addition to MySpace, News Corp. owns the videogame site IGN, movie-review aggregator Rotten Tomatoes, and other Web sites. WSJ.com and FoxNews.com would not be part of the online combination under discussion.

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