Besieged Yahoo's Plan: AOL and Layoffs?


Facing the prospect of a takeover battle with Microsoft, Internet giant Yahoo is reportedly looking to do a deal with AOL while slimming down its ranks.

Yahoo!'s headquarters in California.
Paul Sakuma

Yahoo has reached out to AOL to feel out its interest in making some sort of deal, according to a report in The Washington Post, citing an anonymous source. The report was unclear about whether Yahoo's overture was for a buyout or alliance. It said Yahoo may be reaching out to other companies as well.

In the meantime, Yahoo is apparently notifying up to 1,000 employees this week that their positions are being eliminated. The move follows though on layoff plans Yahoo announced last month. The Sunnyvale, Calif., company has about 14,000 employees.

Yahoo Monday formally rejected a $44 billion takeover offer from Microsoft , saying that the offer "substantially undervalued" the Internet media company. The move has prompted speculation that Microsoft may go hostile. The other reigning Internet giant, Google , has come out in opposition of such a move.

AOL is owned by Time Warner . The new CEO of Time Warner, Jeffrey Bewkes, has hinted about the possibility of spinning off AOL as a way to boost the media conglomerate's moribund stock price.

In related news, Yahoo announced it purchased Maven Networks, which provides technologies that allow companies to show video online, for about $160 million.