Jan. 7 (Bloomberg) -- Microsoft Corp. isn’t holding talks to finance a new bid for Yahoo! Inc., a person familiar with Microsoft’s plans said, responding to a blog report.

The TechCrunch site said today that an investment group led by Silicon Valley executives and bankers is putting together a bid for Yahoo that would be funded largely by Microsoft. The software company would also acquire Yahoo’s Internet-search business under the deal, the blog said.

The report revived speculation that Microsoft would make another play for Yahoo, following a failed takeover attempt last year that lasted months. Microsoft isn’t discussing such a plan, said the person, who declined to be identified because the information is confidential. The deal was characterized as a proposal to Microsoft, TechCrunch said.

“I would look at this as a remote possibility, but not a likely one,” said Marianne Wolk, an analyst with Susquehanna Financial Group in New York.

Frank Shaw, a spokesman for Redmond, Washington-based Microsoft, didn’t return a call seeking comment. Brad Williams, a spokesman for Sunnyvale, California-based Yahoo, said the company doesn’t comment on rumors and speculation.

The proposed deal would value Yahoo at $20 billion, offering a 20 percent premium over the current share price of about $13, TechCrunch reported. Yahoo rejected Microsoft’s offers of as much as $47.5 billion last year and turned down a bid in June for its search-search unit alone.

Hard Sell?

“I would think that the large shareholders would be a little bit reluctant to sell at such a small premium,” said Todd Greenwald, an analyst with Signal Hill Capital Group LLC in Baltimore.

Microsoft Chief Executive Officer Steve Ballmer said in November that the company is finished with attempts to buy all of Yahoo, though it still may be interested in a search agreement. Chief Financial Officer Chris Liddell has called Yahoo a “declining asset,” saying that the chances of an acquisition of the whole company are negligible.

That’s still the company’s position, the person said today.

Yahoo is looking for a new CEO to replace Jerry Yang and revive growth after profit dropped in 10 of the past 11 quarters. Microsoft had sought a Yahoo deal as a way to boost its share of Internet searches. Its market share is one-seventh the size of Google Inc.’s, even after more than five years of investments.

Growth in the overall Internet ad market may slow to 11 percent this year, after four years of rising at least 20 percent, according to New York-based research firm EMarketer Inc.

Microsoft’s highest offer valued Yahoo at $33 a share. Yahoo’s shares, down 48 percent last year, dropped 29 cents to $12.71 at 4 p.m. New York time on the Nasdaq Stock Market. Microsoft, which fell 45 percent in 2008, declined $1.25 to $19.51 today.

To contact the reporter on this story: Dina Bass in Seattle at dbass2@bloomberg.net

Last Updated: January 7, 2009 16:20 EST