Yahoo-AOL Deal 'Unlikely' In July

According to the source, who was not authorized to speak on record, the talks between Yahoo and AOL are now taking account of an increase to Yahoo's revenue due to Yahoo's search advertising deal with Google.

Yahoo was also in talks with News Corp. about merging operations with News Corp.'s MySpace, but talks fell apart because News Corp. wanted $15 billion from Yahoo for MySpace and News Corp.'s other Web assets.

In a statement Monday, Yahoo said it was still willing to talk with Microsoft about a full buyout. Microsoft had previously revealed that if Yahoo replaced its board, Microsoft was still open to buying all or part of Yahoo.

After Microsoft withdrew its $47.5 billion buyout offer, Microsoft had proposed an alternative deal with Yahoo to counter the Yahoo-Google search ad deal. Microsoft's alternative deal included a $1 billion purchase of Yahoo's search business, $8 billion in exchange for a 16 percent stake in Yahoo, and a $1 billion per year revenue-sharing partnership.

Reuters reported that Monday sources familiar with the Yahoo-Microsoft talks said that Carl Icahn, the investor who owns more than 4 percent of Yahoo, said to Yahoo execs that he would support a partial deal between Yahoo and Microsoft if Microsoft guaranteed $2.5 billion per year revenue.