Yahoo surges in premarket on report of new Microsoft deal; S&P keeps buy rating

NEW YORK, Jul 02, 2008 (Thomson Financial via COMTEX) -- YHOO | Quote | Chart | News | PowerRating -- Shares of Yahoo Inc. surged in premarket trading following a report that Microsoft Corp. was preparing an attempt to acquire the Web portal's search business.

The stock ran up 8.2% to $21.85 ahead of the open. The shares had hit a low of $19.59 in intraday trading on Tuesday, the lowest price seen since Jan. 31.

The Wall Street Journal reported Wednesday, citing people familiar with the discussions, that Microsoft has recently approached other media companies, including Time Warner and News Corp., about joining together in a deal that would lead to Yahoo's break up.

The report said that in the past, Microsoft mulled a deal in which it would acquire Yahoo's search business and another partner would combine with what remained of Yahoo.

Standard & Poor's Analyst Scott Kessler said he thinks such a "complicated" deal is somewhat unlikely.

"Nonetheless, we view Yahoo as undervalued and think it is under substantial pressure to at least seem more shareholder focused," Kessler said.

He reiterated his buy rating on Yahoo's stock.

Microsoft's stock, a component of the Dow industrials, tacked on 0.6% to $27.02 in premarket trading. Tomi Kilgore tk1

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