Shares in Yahoo! surge and fall on rumours of more Microsoft talks

NEW YORK - Shares in Yahoo! surged by more than 10% yesterday as reports suggested that the internet firm was back in talks with Microsoft.

Yahoo! denied it had reopened merger talks and Microsoft was unavailable for comment, but this did not stop its shares jumping to almost $24 after technology blog TechCrunch reported that the software giant was considering another offer.

Michael Arrington, founder of TechCrunch, reported that Microsoft was considering a new offer at a price below its previous bid of $33 per share.

However, Yahoo!'s denial and a report on CNBC stating that no deal was on the table helped push Yahoo!'s share price back down to $22.04.

The uncertainty continued as other sources said that a partial deal was back on. Microsoft originally offered to buy Yahoo for $44.6bn or $31 a share, before raising its bid price to $33 a share and $47.5bn.

The reports that talks were back on gave hope to some disappointed Yahoo! investors who believe that CEO Jerry Yang handled the merger talks badly and damaged the company's share price.

Microsoft is still thought to be interested in acquiring Yahoo!'s search business and merging it with its own, but is not willing to bid for the whole company, which has since signed a controversial search advertising deal with rival Google.