News Corp was at the top of a shrinking list of options being considered by Yahoo as a way of escaping Microsoft’s unsolicted takeover bid, although investors and analysts generally discounted the chance of a deal to save the company.

Talks have been taking place between Yahoo and News Corp about a possible combination of its Fox Interactive Media arm with the internet company. Yahoo would gain the social networking site MySpace, while Rupert Murdoch’s News Corp would take a 20 per cent stake in Yahoo, according to those close to the situation.