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Yahoo shares rally on CEO rumour

Yahoo's stock rallied yesterday on a report that AOL's former chief executive believes he can raise enough money in a worsening recession to buy the struggling internet company for as much as US$30 billion ($56.48 billion).

The Wall Street Journal raised investor hopes with a story saying Jonathan Miller, who stepped down as AOL's top executive two years ago, is trying to secure financing to make a bid for Yahoo at US$20 to US$22 a share, or US$28 billion to US$30 billion.

The story posted on the Journal's website cited unnamed people familiar with the matter.

Branding the report a "rumour", Yahoo spokeswoman Tracy Schmaler declined to comment. Miller did not respond to interview requests.

Yahoo shares rose US76c, or more than 7 per cent, to close at US$11.50, reflecting hopes that a new suitor may emerge. The surge left Yahoo with a market value of just under US$16 billion.

Given his past experience running AOL, Miller has the connections and savvy needed to turn around Yahoo, says Standard & Poor's internet analyst Scott Kessler.

But Miller faces a huge hurdle: a credit crunch and the prospect of the deepest recession in a generation has spooked lenders and investment funds so badly that they have shown little interest in making big bets on risky propositions like this.

Speculation about Yahoo's future has intensified since rival Google Inc pulled out of a proposed advertising partnership a month ago