A piece in the online version of Sunday’s Times of London is reporting that Microsoft and Yahoo are in talks again, in a complex deal that could see Microsoft acquiring Yahoo’s search business for $20 billion, after putting up $5 billion to fund a new management team headed reportedly by ex AOL chairman Jonathon Miller and Ross Levinsohn, a former Fox Interactive president. According to the Times:

The talks with Yahoo involve Microsoft obtaining a 10-year operating agreement to manage the search business. It would also receive a two-year call option to buy the search business for $20 billion. That would leave Yahoo to run its own e-mail, messaging, and content services

In a widely reported attempted takeover starting last February 1, Microsoft tried to buy Yahoo, at first for what worked out to be $31 billion, and then after a series of parries and gaffes by both sides, Microsoft reportedly upped the offer to some $33 billion.  When Yahoo did not immediately accept the offer, Microsoft walked away from the deal in May.  Since that time, both because of negative investor confidence in Yahoo, and also a severe downturn in the economy, Yahoo’s share price has dropped considerably, from a high of near $30, to a low of well under $10 recently.

Yang announced last week that he would be stepping down from the CEO position at Yahoo, which along with a major stock buy coming from Yahoo investor and board member Carl Icahn has upped Yahoo’s price in the past few days, closing at $11.51 on Friday.

Microsoft had seen Yahoo’s search business as a way to help in its battle with search leader Google, but Steve Ballmer, Microsoft CEO, has said repeatedly in recent months that he was not interested in a new deal to acquire the company.  This latest reported effort would help to prop up both Yahoo’s bottom line and its management, while getting Microsoft what it wanted all along, which was search.

via Seattle PI Tech Report

UPDATE: Kara Swisher at The Wall Street Journal's All Things Digital is calling this "total fiction", pointing out that Yahoo's entire market cap is $16b.  Well it's nice to get a little MSFT-YHOO news on a weekend again, anyway.