March 5 (Bloomberg) -- Yahoo! Inc., fighting off a $44.6 billion takeover bid from Microsoft Corp., extended the deadline for nominating candidates for its board in an effort to avoid a proxy fight.

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

The delay allows Yahoo directors and Chief Executive Officer Jerry Yang to explore an alternative to Microsoft's offer. Microsoft said Feb. 11 it may pursue ``all necessary steps'' to win over Yahoo shareholders, and a person familiar with the matter said last month that Microsoft may seek to oust Yahoo's directors.

``Yahoo management is grasping at straws,'' said Jordan Rohan, an analyst at RBC Capital Markets in New York. ``Microsoft has more money and is a guaranteed payoff for Yahoo shareholders. A combination with AOL would just add to confusion.''

All 10 of Yahoo's directors are up for re-election at the next annual meeting. Yahoo hasn't yet set a date for the meeting, which it must hold every 13 months. The last one was June 12.

Finishing Touches

Time Warner is putting the finishing touches on a deal that can be taken to Yahoo's board, the Wall Street Journal reported earlier today, citing people familiar with the matter. In exchange for AOL, Time Warner would get a ``sizeable minority stake'' in the combined entity, the newspaper said.

The Yahoo board is continuing to pursue all strategic options, said spokeswoman Tracy Schmaler. Ed Adler, a spokesman for Time Warner, declined to comment. Microsoft spokesman Bill Cox didn't immediately return calls for comment.

Yahoo, based in Sunnyvale, California, gained 61 cents to $28.67 at 4 p.m. New York time in Nasdaq Stock Market trading. Redmond, Washington-based Microsoft added 53 cents to $28.12.

Microsoft, trying to narrow Google Inc.'s lead in online advertising and Internet searches, announced 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 would more than triple its share of Internet searches in buying Yahoo, and save as much as $1 billion a year by reducing overlap in their operations. The advantages of combining with AOL, whose units include its Web site and an ad network, would be less visible to investors, Rohan said.

Advice for Microsoft

The software maker is getting advice from Bear Stearns Cos. CEO Alan Schwartz on the bid, a person familiar with the matter said today. Microsoft is also working with Morgan Stanley and Blackstone Group LP. Yahoo's banking advisers are Goldman Sachs Group Inc., Lehman Brothers Holdings Inc. and Moelis & Co.

The postponement removes an ``imminent deadline'' and allows workers to focus on their tasks, Yang said today in a letter to employees. The company is ``making progress clarifying the many options available,'' he said.

About $1 billion in annual cost savings would result from a merger of AOL and Yahoo, the Journal said. Investors will probably prefer Microsoft's offer, as that would guarantee them a cash payment, RBC's Rohan said. He recommends buying Yahoo shares and doesn't own any himself.

Separately, News Corp. and Yahoo continue to talk about giving News Corp. a stake in Yahoo in exchange for the MySpace social-networking Web site and some other Internet sites, the Journal said. News Corp. spokeswoman Teri Everett declined to comment.

AOL had 4.9 percent of the U.S. Web search market, behind Microsoft's 9.8 percent and Yahoo's 22.2 percent, according to January data from Reston, Virginia-based researcher ComScore Inc. Google dominates the market with 58.5 percent.

To contact the reporters on this story: Alex Armitage in London at aarmitage@bloomberg.net; Ville Heiskanen in New York at vheiskanen@bloomberg.net

Last Updated: March 5, 2008 16:19 EST