According to latest reports, Yahoo is thinking about merging with media conglomerate News Corp. in an effort to defend its self against a hostile takeover by Microsoft. But I think the main reason for this discussion is something else only. Just the thought of Yahoo+News Corp will make Microsoft sweeten its stand, so the chances of re-evaluation of Yahoo by MS is very high now. As reported earlier, Yahoo wants at least $40 per share, which takes the valuation of Yahoo to about $56 billion.

Business Week reports that "Yahoo and News Corp. are discussing a deal that would involve mixing Yahoo's businesses with News Corp. Internet properties, including the popular social network MySpace. As part of the complicated deal, News Corp. and a private equity firm would buy a significant piece of Yahoo, as much as 20%, allowing Yahoo to remain independent. Google (GOOG) may also play a role, according to some accounts, possibly handling Web search and related advertising for Yahoo. It's unclear how much the deal would value Yahoo, though it's certainly above the $42 billion that Microsoft's cash-and-stock offer is now worth."

[Via Business Week]