News Corp joins battle for Yahoo

Microsoft's weekend threat to take its bid for Yahoo hostile has sparked a flurry of new interest in the deal, with News Corp reportedly in talks to join the bid and the internet firm nearing a deal with Time Warner's AOL to combine online operations.

Yahoo is also negotiating to display internet search ads from Google as a means of forcing a higher bid.

Rupert Murdoch's News Corp is said to be discussing a joint tilt for Yahoo that would add MySpace to the Yahoo-Microsoft combination.

The talks are at a "sensitive stage" with terms being finalised, the New York Times says.

Yahoo faces a three-week deadline from Microsoft to reach a deal or face a hostile effort to take over the board. It is searching for alternatives or proof it is worth more than Microsoft's offer, now valued at $42 billion (£21 billion).

That could pave the way for the higher offer Yahoo has been angling for but may be complicated by its proposed links with AOL.

This would see the two companies combine their internet operations.