Microsoft has approached potential media partners including Time Warner and News Corp in readiness for a fresh bid for Yahoo which would lead to its break up.

Microsoft is keen on buying Yahoo's search business while its media partner would buy the remainder of the internet media giant, The Wall Street Journal reported today.

A month ago Yahoo president Susan Decker confirmed that talks between Yahoo and Microsoft were still going on despite its full $47.5 billion offer for the whole company being rebuffed in May.

She said: “There are many ways that a combination could be very beneficial.” Plans for Microsoft to take a significant minority stake in Yahoo were also rebuffed.

At the end of January, Microsoft approached Yahoo! and offered to buy the company for $31 a share in cash and paper. In May, Microsoft raised its offer to $33 a share, valuing Yahoo! at $47.5 billion, (£24.3 billion) but was again rebuffed. T

Yahoo! has announced two advertising deals, with Wal-Mart and CBS. A spokesman refused to divulge their value but they will help Jerry Yang, its co-founder and chief executive, to convince shareholders that he was right to have rejected a $33 a share offer from Microsoft. Yesterday, the shares rose 3 per cent to $26.86.

Mr Yang is under significant pressure to complete a deal with Microsoft before August 1, when the internet group holds its annual meeting.

Carl Icahn, the billionaire investor, has already taken a 4 per cent stake and is seeking regulatory approval to increase his holding to almost 10 per cent. He has proposed motion for the meeting which aims to oust all nine directors from the Yahoo! board.

In the past, Microsoft has floated an arrangement under which it would acquire Yahoo's search business and another partner, such as News Corp's MySpace or Time Warner's AOL, would combine forces with what remained of Yahoo.

News Corp is the parent company of The Times and Times Online.

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