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TimesOnlineUK reports that Rupert Murdoch's News Corp (NYSE: NWS) explored the possibility of swapping MySpace for a 25% stake in Yahoo!, Inc. (NASDAQ: YHOO). This would be a great deal for Murdoch and a questionable one for Yahoo.

If Murdoch could complete this deal, he would realize a 21x increase in the value of his $580 million investment back in the summer of 2005. Yahoo was worth $37 billion yesterday, 25% of which would be worth $12.3 billion. And the nice thing for Murdoch about getting stock would be that he would not need to pay tax on the gain until he cashed out the Yahoo shares.

But for Yahoo, the deal would be of questionable value. As Murdoch pointed out in a recent interview, Facebook is grabbing share from MySpace. From this comment, I infer that Murdoch is not eager to or does not know how to adapt MySpace to regain the competitive initiative. Moreover, Yahoo is so stressed out trying to compete with Google, Inc. (NASDAQ: GOOG), that it will not be able to devote the resources needed to keep up with Facebook.

It looks to me like Murdoch is trying to realize an enormous gain on MySpace. But unless Yahoo's "new" management team sees some benefit of the deal that I don't, I suspect Murdoch will need to find another way to get his money out. IPO anyone?

Peter Cohan is president of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter. He has consulted to News Corp.'s CEO and has no financial interest in the securities mentioned in this post.

Other BloggingStocks coverage:
Peter Cohan: What took so long -- and, with YHOO up sharply since announcement, will Jerry Yang sell?
Why Microsoft Should Buy Yahoo!
Melly Alazraki: Webcast uninspiring; I was hoping for new talent from the outside.
Jonathan Berr: Yahoo! needs fixing; it should avoid bidding for Dow Jones. And will Susan Decker now quit?
Sarah Gilbert: Sue Decker was passed over for Yahoo! CEO role; Is she not CEO material?
Brian White, May 3, 2007: $40 million in 2006 too much for Semel
December 2007: Yahoo! reorganization anoints Decker; you call this a reorganization? Terry Semel should be fired.