A Yahoo office in Santa Monica, California. (AP)

New York, Feb. 14 (AFP): Yahoo is reportedly exploring an alliance with Rupert Murdoch’s media conglomerate News Corp in an effort to stave off or possibly to push up the cost of a takeover by Microsoft.

Word of Yahoo being in clandestine talks with News Corp surfaced yesterday as the Internet giant laid off workers and chief executive Jerry Yang urged stockholders to have faith in the firm and its leaders.

“Today, Yahoo is a faster-moving, better-organised, more nimble company than it was just a few months ago," Yang said in a letter outlining reasons the company spurned Microsoft’s $44.6-billion offer.

“We have redeployed our resources to drive Yahoo’s key strategic priorities - taking important steps to streamline our organisation and close down or scale back businesses that don’t support these critical growth initiatives.”

Yang assured stockholders that Yahoo is positioned to capitalise on “a huge market opportunity”.

Popular website TechCrunch and The Wall Street Journal reported yesterday that News Corp might be the white knight that saves Yahoo from Microsoft’s clutches.

News Corp’s global media empire includes Journal publisher Dow Jones, popular online social networking website MySpace, Fox News, and 20th Century Fox.

A potential deal outlined in media reports centres on combining MySpace and other News Corp properties with Yahoo in exchange for a stake of 20 per cent or more in Yahoo. That could help Yahoo thwart a hostile takeover by Microsoft while remaining independent.

But Microsoft has vowed to pursue the company despite Yahoo’s rejecting its offer on Monday.

Microsoft wants to merge the two companies’ resources to better challenge Internet colossus Google, which holds the lion’s share of an online advertising market projected to grow from $45 billion globally in 2007 to $75 billion in 2010, according to industry analysts. They caution that alliance talks with News Corp or other firms could be Yahoo’s strategy to pressure Microsoft into upping its offer.

“Yahoo is trying to improve their bargaining position right now,” analyst Rob Enderle of Enderle Group in Silicon Valley said.

“They want Microsoft to come up with more money. Yahoo knew if it just walked away from the offer its stock would drop 50 per cent and the share holders would come after them with pitchforks.” Yahoo’s board said Microsoft’s offer of $31 per share “significantly undervalues” the company.