Microsoft, Yahoo trying to reach a friendly deal

hough the talks have intensified, a deal was not imminent and the people familiar with the matter said an agreement was not likely on Friday. The people cautioned that the talks could fail to produce an accord, as have previous attempts to reach a deal.

The two sides and their advisers have had informal discussions over the past week, but have been stymied by a divide on the price Microsoft should pay to acquire Yahoo, say the people. Microsoft has been weighing whether to drop its bid or go hostile, and has promised to announce its decision this week. As of Thursday night, Microsoft was leaning toward going hostile, but the situation remained fluid, according to people familiar with the matter.

Now, people close to the two sides are attempting to avert that prospect with discussions they hope could lead to a negotiated outcome, say the people. Microsoft has wanted to avoid a hostile takeover battle, which could drag out and result in distraction and the loss of key Yahoo employees. The software company also does not want to abandon its pursuit of Yahoo altogether, though it has threatened to do so, say people close to the company. A Microsoft spokesman declined to comment.

It's unclear whether the two sides will be able to bridge a gap on the issue of price. Microsoft this week indicated a willingness to raise its bid to as much as $33 per Yahoo share, according to people with knowledge of the situation. Major Yahoo shareholders have signaled they want a price in the range of $35 to $37 a share, the people say. Each dollar per share Microsoft raises the price represents a roughly $1.4 billion increase in the total value of the deal.