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Imagine Yahoo’s frustration. As one of the last independent online properties of real scale, it should be the centre of a bitter power struggle for the future of the internet – and pretty much able to name its price. Instead, everybody wants a piece of the action, but nobody can credibly go head-to-head with Microsoft’s bid, worth about $29 a share at present.

In recent days the phoney war, which has persisted since the software giant rolled its tanks on to Yahoo’s lawn two months ago, seems to have ended. Yahoo is trying to broker a three-way alliance with Time Warner and Google. Time Warner would inject AOL and some cash into Yahoo in return for a stake. The combined group might outsource its search advertising to market leader Google.

Nice idea. The trouble is such a deal would not give Yahoo investors a firm headline price. And it could throw up more regulatory problems than a sale to Microsoft. If Google powered Yahoo’s paid search, it would completely dominate the advertising medium. Meanwhile, a straight AOL/Yahoo deal, without Google’s advertising expertise, would involve two stumbling giants trying to prop each other up.

A sale to Microsoft still makes the most strategic sense – though it is not clear why it would consider bringing in News Corporation as a bidding partner. Buying Yahoo is a risk for Microsoft, both in terms of antitrust problems and the difficulty of integrating the businesses. But it needs to try if it wants to have a chance of catching Google on the internet and heading off competitive threats to its own core business.

The sudden blur of activity in the battle for Yahoo could herald the endgame. Alliances may continue to shift. But the sheer buying power of Microsoft, which can raise its offer or add more cash, should prevail.

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