Shares in Yahoo jumped 7% amid expectation Microsoft is preparing to increase its bid for the company.

Microsoft is reported to be talking to the internet firm about improving the offer it made in February, which was then worth $44.6bn (£22.4bn).

The software giant wants to do a deal to be able to compete with Google, which dominates the lucrative market for internet advertising.

Yahoo rejected the cash and share offer as inadequate.

Microsoft's bid was originally worth $31 a share, but the value of the offer has since fallen as the Microsoft share price has declined.

Microsoft's shares closed on Friday virtually unchanged at $29.24. Meanwhile, Yahoo's shares were $1.85 higher at $28.67.

'Negotiating tactics'

Microsoft's chief executive Steve Ballmer has said the existing proposal was a "generous" one, as it offered Yahoo shareholders 62% more for their shares than they were worth the day before the bid.

The Yahoo board was given until the 26 April to accept the software giant's offer or face a hostile bid.

In a letter to the internet firm's board on 5 April, Mr Ballmer threatened to put the proposal directly to Yahoo shareholders and remove the firm's directors.

After the deadline passed without a response from Yahoo, the Microsoft board met this week to discuss its next move.

But the meeting ended without an agreement, according to reports.

Online advertising

There are suggestions Microsoft will up its bid to around $33 per share, but it is understood that Yahoo shareholders are hoping for $35 to $37 per share.

Mr Ballmer has in recent weeks threatened to either lower the offer or to walk away from the deal.

But some analysts dismiss this as negotiating tactics.

Microsoft wants to increase its share of the lucrative online advertising market, currently dominated by search engine firm Google.

It was worth $40bn in 2007 and is predicted to double to $80bn by 2010.

When Microsoft announced its offer in February it said that "together Microsoft and Yahoo can offer a competitive choice while better fulfilling the needs of customers and partners".

Courtesy: BBC News 

Published in : The News, Travel & Business

Keywords : News, Travel & Business, Yahoo shares boosted on bid hopes

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