Rupert Murdoch may make an unlikely white knight, but his News Corp. conglomerate is reportedly coming to Yahoo's rescue.
For almost two weeks, Yahoo has been trying to fend off a potential sale to Microsoft, which offered to buy the beleaguered Sunnyvale company for $44.6 billion on Feb. 1.
On Monday, Yahoo's board of directors formally rejected Microsoft's offer saying it "substantially undervalues" Yahoo's global brand and audience, as well as other assets.
The Wall Street Journal, which is owned by News Corp., reported today that its parent company is considering taking a stake in Yahoo that could exceed 20 percent.
Earlier this month, Murdoch ruled out making a direct bid for Yahoo. News Corp has only $3.5 billion in cash, compared to Microsoft's $21 billion, and would need help from private equity firms to purchase even part of Yahoo.
One scenario reportedly under discussion calls for News Corp. to give MySpace to Yahoo in addition to cash. According to the Journal, News Corp. believes MySpace is worth between $6 billion and $10 billion. In return, News Corp. would get a stake in Yahoo.
Ben Schachter, an analyst with UBS, said in a note that such an arrangement would likely be nixed by antitrust regulators because it would require Yahoo to outsource its search advertising business to Google.
"We believe that Microsoft will do what is necessary to get the deal done, and we don't believe its first