Paperstan (MSFT may sweeten its offer; MOT and NT in talks)

The WSJ reports that Motorola (MOT) and Nortel (NT) are in talks to combine their wireless-infrastructure units in a joint venture. The talks, which are separate from efforts also under way at Motorola to possibly shed its handset division, show the steps Motorola's new CEO, Greg Brown, is contemplating to restructure the telecom giant.

According to the WSJ, Yahoo’s (YHOO) rejection of Microsoft (MSFT) buyout bid will test whether the software giat is willing to pay a lot more for the Internet co, or risk a truly hostile takeover attempt. Microsoft may sweeten its offer, say people familiar with the matter. But any increase is likely to fall short of what Yahoo's directors believe would fairly value the co, setting the stage for a protracted battle. Ppl close to Microsoft say the co is reluctant to launch a proxy fight to push out Yahoo's board. A fight could increase the odds that key Yahoo employees will leave the co. It is more likely to pursue less-hostile options, such as recruiting big shareholders to put pressure on Yahoo to negotiate with Microsoft for an acceptable price.

The Financial Times reports that Microsoft had been willing to pay $43 a share a yr ago, when Yahoo was trading at about $28. Steve Ballmer has already signalled his co’s determination not to take “no” for an answer. In his letter making the offer, he said his co “reserves the right to pursue all necessary steps”. Microsoft has a team of advisers in place for any proxy fight. It includes Alan Miller of Innisfree, the proxy solicitation firm, and Joele Frank, the New York M&A public relations specialist, as well as financial advisers from the Blackstone Group and Morgan Stanley.

“Heard on the Street” discusses Cardinal Health (CAH), saying that the co appears to be getting back on its feet, and that could give a shot to its ailing share price. The New Year has brought some hope: Last month, Cardinal appointed George Barrett as vice chmn and CEO of its drug and medical-supply distribution division. In addition, the co has renewed a contract with one of its biggest customers and has a generic version of a cardiac drug about to hit the shelves. Relative to its competitors, Cardinal has had a weak generic-sales program, a situation almost certain to improve with Mr. Barrett's arrival. "He's a solid exec who has incredibly strong independent supply-chain relationships," says Randall Stanicky, of Goldman Sachs. Mr. Stanicky recently reaffirmed Buy rating.