Following Henry Blodget's prediction that Yahoo CEO Jerry Yang and company president Sue Decker are "toast," Reuters is reporting that Microsoft Corp is preparing a new bid for Yahoo's search business, and has already approached other media companies about joining it in a deal that would effectively lead to Yahoo's breakup.

"By mid-day a CNBC report refuted the report of a new approach. Citing unnamed sources, CNBC said Microsoft has held no new talks and there are no negotiations, sending Yahoo's shares up 7 percent."

The Wall Street Journal said that the talks are in fact ongoing, but are preliminary and are unlikely to lead to a company split just yet. Of course, all of the companies involved have declined to comment.