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Yahoo! Investors Cautious on Tumblr Report

NEW YORK ( TheStreet) -- Yahoo! (YHOO - Get Report) slipped Friday following a report that the Internet search portal is in talks to buy Tumblr, the privately-held blog network, in a deal that could reach a value of $1 billion.

Yahoo! fell 0.2% to close at $26.52, paring its gain in 2013 to 33% compared to 16% for the Nasdaq Composite index.

Discussions between Yahoo! and Tumblr, a social media site that allows users to share posts, videos, photos and other content, was first reported by AllThingsD, a Dow Jones Web site. Talks have "gotten stronger more recently" though a deal is far from secure, the Web site said. Yahoo spokeswoman Lauren Armstrong, in an e-mail, said the company doesn't "comment on rumors or speculation."

CEO Marissa Mayer, who took over the Internet portal in July 2012, has made clear her intention to make the Sunnyvale, Calif.-based company's offerings more attractive to young people. A former executive at Google (GOOG), Mayer has focused on acquiring or developing online services that can generate user traffic and advertising, said Jeff Jarvis, who teaches entrepreneurial journalism at the City University of New York's Graduate School of Journalism.

"Tumblr is an extremely easy and elegant way of sharing content," Jarvis said in a phone interview. "It would also play into Mayer's apparent emphasis on building services at Yahoo! that people really want. There's a bit of a goldmine in services like Tumblr that help companies like Yahoo! understand who's making the good stuff and who's creating the good stuff."

Yahoo! shares have gained 70% since Mayer took over in July compared to a 20% advance for the Nasdaq.

Tumblr officials didn't respond to a request for comment on a possible deal with Yahoo!.

-- Written by Leon Lazaroff in New York.

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