Microsoft and Yahoo have intensified talks in an effort to reach a friendly agreement on a buyout of Yahoo, a source familiar with the matter said on Friday.
Yahoo shares rose 6.4 percent on news of the accelerated talks, as investors had feared Microsoft might walk away from its unsolicited bid or launch a proxy battle.
Microsoft Chief Executive Steve Ballmer said on Thursday that walking away from a deal with Yahoo was one of three options the company was weighing.
News of the heightened talks was first reported on the Wall Street Journal's Web site.
Yahoo officials could not immediately be reached. Microsoft declined comment on the report.
Microsoft shares fell 1.7 percent to $28.89.