Yahoo shares yo-yo on buy-out talks

By Kenneth Li and Eric Auchard

NEW YORK/SAN FRANCISCO (Reuters) - Shares of Yahoo (YHOO.O) rose as much as 11 percent on Tuesday, reversing earlier declines, after contradictory reports on whether buyout talks with Microsoft (MSFT.O) were heating up again.

"People are attributing huge outcomes to very small pieces of information," said Sanford C. Bernstein analyst Jeffrey Lindsay, referring to a flurry of thinly detailed stories citing unnamed sources that caused Yahoo's stock to spike.

Following a report on technology blog TechCrunch saying merger talks were back on, Yahoo shares sailed as high as $23.71 (12.04 pounds), a 10.5 percent rise from their Monday close and a 15 percent jump from a Tuesday session low of $20.60.

The shares erased most of the gains after TV news channel CNBC said no deal was on the table between the two companies. Other news reports had also suggested talks on a partial deal were back on. The reports all cited unnamed sources.

"It's 'he said, she said,'" Canaccord Adams analyst Colin Gillis said.

Both Microsoft and Yahoo declined to comment.

Yahoo shares settled back to trade up 1.6 percent at $21.80 in late Nasdaq trading. The stock had traded down around 3 percent early in the day after a downgrade by broker Thomas Weisel Partners that argued Yahoo was worth only $18 a share.

TechCrunch cited multiple unidentified sources saying Microsoft was back in talks to buy all of Yahoo, after walking away in May.