Microsoft Yahoo Deal Total Fiction

LONDON (Reuters) -A report in the Sunday Times that Microsoft Inc is in talks with YahooInc to buy the U.S. internet company’s online search business for $20billion is "total fiction," according to a key executive cited by aninfluential U.S. blog.

The Sunday Times, which did not cite its sources, said the proposalunder discussion involves a complex transaction that would see the U.S.software giant support a new management team to take control of Yahoo.

The team would be led by ex-AOL Chairman and CEO Jonathan Miller andformer Fox Interactive Media President Ross Levinsohn, the report said.

But the AllThingsDigital blog, affiliated with the Wall StreetJournal, quoted Levinsohn as saying the report was "total fiction." Topsources at Yahoo and Microsoft also scoffed at the report, the blogsaid.

Yahoo spokesman Brad Williams said: "We don’t comment on rumors, and all this is a rumor."

A Microsoft spokeswoman declined to comment.

Microsoft withdrew its $47.5 billion buyout offer for Yahoo in Mayafter Yahoo Chief Executive Jerry Yang and his board rejected the bidas too low.

Bid speculation was sparked again earlier this month when Yangannounced he was stepping down. Microsoft CEO Steve Ballmer ruled a bidout at the time, but said he was "open" to talks on a deal for Yahoo’ssearch business.

Activist investor Carl Icahn — who sits on Yahoo’s board andincreased his stake in the company to 5.4 percent last week –reiterated he favored the sale of the search business, according to aninterview in the December 1 edition of Barron’s.

"Microsoft has said publicly that they are not interested in buyingthe whole company, and I believe them. But they are interested in doinga deal on search, and we should pursue that," Icahn was quoted byBarron’s.

Earlier this year, Icahn threatened to launch a proxy fight againstYahoo and oust Yang in an effort to push the company to acceptMicrosoft’s offer. He later struck a deal with Yahoo and joined itsboard.

Icahn began amassing Yahoo shares during the company’s merger talks with Microsoft.

The Sunday Times said senior directors at Microsoft and Yahoo areunderstood to have agreed on the broad terms of the deal, but there isno guarantee it will succeed.

(Reporting by Rosalba O’Brien in London and Anupreeta Das in New York; Editing by Jan Paschal)