March 10 (Bloomberg) -- News Corp. Chairman Rupert Murdoch said he isn't going to challenge Microsoft Corp.'s attempt to buy Yahoo! Inc., narrowing options for the second-largest Internet search engine.

``We're not going to get into a fight with Microsoft; they've got a lot more money than us,'' Murdoch told investors today at a Bear Stearns Cos. conference in Palm Beach, Florida.

Yahoo rejected a $44.6 billion takeover bid from Microsoft a month ago. New York-based News Corp. and Yahoo held talks about a combination to block the bid, a person familiar with the exchange said last month. Last week, Yahoo extended the deadline for nominating candidates to its board, allowing Chief Executive Officer Jerry Yang to explore alternatives to Microsoft's offer.

``He's been clear he doesn't want to buy Yahoo outright,'' said Marianne Wolk, an analyst at Susquehanna Financial Group in New York, who rates Yahoo shares ``neutral'' and doesn't own any. ``There's still a door open in terms of other potential types of deals.''

News Corp. Class A shares, down 21 percent in the past year, fell 29 cents, or 1.6 percent, to $17.87 at 4 p.m. in New York Stock Exchange composite trading. Yahoo, based in Sunnyvale, California, fell 52 cents to $28.51 in Nasdaq Stock Market trading. Microsoft rose 18 cents to $28.05.

Microsoft

Microsoft said Feb. 11 it may pursue ``all necessary steps'' to win over Yahoo shareholders, and a person with knowledge of the matter said last month that Redmond, Washington-based Microsoft may seek to oust Yahoo's directors.

Yahoo said last week it wants more time to explore options ``without the distraction of a proxy contest.'' The nominating deadline, which had been March 14, will now be 10 days after Yahoo announces the date for its annual meeting, the company said. Yahoo also is in talks about a deal with Time Warner Inc.'s AOL unit, a person familiar with those discussions said.

Microsoft, trying to narrow Google Inc.'s lead in online advertising and Internet searches, disclosed the offer for Yahoo on Feb. 1. Yahoo's board has deliberated for the past month on how to counter Microsoft's bid, which it says ``substantially undervalues'' the company.

``Microsoft will succeed in acquiring Yahoo,'' Susquehanna's Wolk said. ``I don't know how you're going to be able to convince investors that another offer that's more of an equity offer or based on a combination of multiple businesses is as attractive.''

Journal

MySpace, the most-popular social networking site, joined a software partnership in 2006 with Google Inc., the top search engine.

News Corp. is ``very happy'' to be in the Google camp through the advertising search partnership, Murdoch said.

Murdoch, who said he's become more pessimistic about the economy in the past month, said News Corp. is in ``very good shape'' to face a weaker economy, as it reduced its dependence on advertising to 23 percent from 41 percent of revenue.

Murdoch, who turns 77 tomorrow, bought Dow Jones & Co. for $5.2 billion last year, gaining control of the Wall Street Journal, Barron's magazine and the Dow Jones Newswires. The Journal will give readers ``the best national and global coverage of any newspaper in the world,'' he said.

``Those people who want something more than a devalued local paper will turn to us increasingly,'' he said. ``Advertising will come with it.''

The Internet is a ``huge'' opportunity for the Journal, which plans to have a large online presence worldwide, as well as special interest Web sites that News Corp. will ``charge a great deal of money for,'' Murdoch said. The company may introduce social networking to the Journal, to allow investors to discuss their holdings, similar to the way MySpace users communicate with each other, he said.

``We may be in for a temporary downturn, a year or so, but you've got great growth around the world,'' he said.

To contact the reporter on this story: Gillian Wee in New York at gwee3@bloomberg.net.

Last Updated: March 10, 2008 16:11 EDT