Could Murdoch block the Microsoft-Yahoo deal?

Rupert Murdoch loves to make trouble for other moguls. Could he stop Microsoft's bid for Yahoo? Wall Street analysts have been asking Murdoch if he would buy Yahoo outright. Never mind that the News Corp. chief doesn't have the cash to outbid Microsoft. Such a straightforward deal would be far too boring for Murdoch to contemplate. Instead, here's a scenario bruited about by Silicon Alley Insider.

Yahoo's board must come up with a deal that makes Yahoo at least as valuable as Microsoft's bid. How does Murdoch get to $45 billion? By injecting $15 billion in capital into the company. That could come in the form of MySpace and the rest of News Corp.'s Fox Interactive Media division, valued at roughly $6 billion, and $9 billion in cash from News Corp. and perhaps some private-equity funds. They'd exchange that for $15 billion in freshly issued Yahoo shares. Yahoo's existing shareholders would own three-quarters of a $60 billion company, while News Corp. would own a quarter. Presto, instant value! As a bonus, News Corp. would become a large shareholder in Yahoo, capable of blocking another advance from Microsoft.

Murdoch is proud of having spent only $580 million for MySpace. Buying into Yahoo at such a dear price might not appeal. But if he can play with other people's money, and tweak Bill Gates and Steve Ballmer in the process, he might just do it.