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Welcome to Microsoft Pri0: That's Microspeak for top priority, and that's the news and observations you'll find here from Seattle Times reporter Sharon Chan.

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July 11, 2008 9:28 AM

Reports: Bad blood could stymie Yahoo-Microsoft deal

Posted by Benjamin J. Romano

The chatter around Yahoo-Microsoft coming out of the Allen & Co. bigwig shindig in Sun Valley, Idaho, this week is increasingly acrimonious and negative toward any deal.

This Reuters story quotes Rupert Murdoch saying a deal between his News Corp. and Yahoo is "very unlikely." Does he think Microsoft will get its hands on Yahoo? "There won't be a deal. There's bad personal feelings."

Earlier this week, Jerry Yang, Yahoo's co-founder and CEO, told Kara Swisher of All Things D that he had no plans to give in to the increased pressure applied by billionaire activist investor Carl Icahn and Microsoft CEO Steve Ballmer on Monday.

"I think handing over the company to Carl Icahn for the express purpose of hoping he can negotiate a complex deal with Microsoft is a big mistake for shareholders," Yang told Swisher. "This is particularly true since Icahn has no plan B and therefore will have no leverage and will be dealing with Microsoft from a position of weakness."

Various other media, including Reuters, have reported that Yang said he has no plans to meet with Microsoft executives at the event, including Bill Gates and Hank Vigil. He does seem to be spending time with the Google guys, though.

While the bad feelings between Microsoft and Yahoo at the executive level could make it tough to get a deal done, it may be moot if Icahn is successful in his bid to take over the company's board of directors. But that could lead to an even bigger challenge: bad feelings toward Microsoft among Yahoo's rank and file. The months of this increasingly ugly pursuit can only have increased the ill will in Sunnyvale.

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