Yahoo is in the final stages of selling a large chunk of its stake in the Alibaba Group back to the company — in a complex deal that is set to include a multibillion-dollar share buyback to investors of the Silicon Valley Internet giant and an eventual IPO of the Chinese company — according to multiple sources close to the situation.

The deal has yet to be officially approved by the boards of both companies, but sources said it is likely to be, and could be announced as early as Monday.

This all could change, of course, since negotiations between Alibaba and Yahoo have taken place in a variety of ways in recent years, without success and with much acrimony. Talks over a tax-free deal — also involving Yahoo’s Japanese partner, SoftBank — collapsed in February, for example.

But the 324th time is apparently the charm — so here are the details of what looks to be a nearly complete agreement that I have ferreted out thus far from lots of relieved sources familiar with the situation:

Yahoo will sell half of its roughly 40 percent stake in Alibaba, in a taxable deal. The transaction is likely to value that portion of Yahoo’s holdings at about $7 billion — or 20 percent of Alibaba’s $35 billion enterprise valuation. Alibaba is in the midst of raising capital to fund the sale.

After taxes of upward of 35 percent are paid on the long-term gains — remember that Yahoo bought the now-lucrative Alibaba stake for a fraction of that, many years ago — the company will likely use the funds to buy back its own shares. That stock has been caught in the mid-teens doldrums for quite a while.

A shareholder dividend is also being considered. It’s not clear if some of the cash will be held back for acquisitions by Yahoo, sources added, but it is unlikely.

As part of the deal, sources said, incentives have been put in place for Alibaba to move forward with a public offering, which sources stressed is without the contractual obligation or a time frame. Alibaba execs have already been publicly indicating such a direction recently, but this will put them more firmly on that path.

In return, Yahoo has agreed to sell the remaining quarter of its current holdings when that IPO does occur. It would then have an only 10 percent stake of Alibaba, which it could sell at any time after the IPO.

If finally struck, the transaction will finally bring to an end one of the more protracted and disputed relationships in the Internet world.

Once close, the pair have been wrangling over the large Yahoo ownership, which Alibaba CEO Jack Ma has been trying to dislodge in a variety of nice and not-so-nice ways. It has resulted in a number of very public disagreements.

That included a nasty back-and-forth over its Alipay unit with now-fired CEO Carol Bartz, threats of takeover of Yahoo with private equity firms and, more recently, making friendly with its just-ousted CEO, Scott Thompson.

Those talks with him in recent weeks, which included a visit to China by Thompson, led to the new deal, which was negotiated primarily between Yahoo’s CFO Tim Morse and legal head Mike Callahan and Ma and Alibaba’s Joe Tsai.

The talks continued even as Thompson was suddenly engulfed in a controversy over a fake computer science degree on his resume that quickly led to his departure from Yahoo on Sunday.

Ironically, the error was first discovered by activist shareholder Daniel Loeb, who will now vote on the deal as a newly named director of Yahoo, after successfully helping to oust Thompson.

He owns almost 6 percent of Yahoo, and is expected to approve the transaction.

But the final decision to approve the deal will be in the hands of a very new board of Yahoo, which has been drastically reshaped in recent weeks. It is meeting tomorrow and perhaps over the weekend to vote on it.

While the deal with Alibaba looks to be nearing an end, Yahoo’s talks to sell its 33 percent stake in Yahoo Japan is not part of this agreement. That’s due to what Thompson had called a “valuation gap,” which sources said is still an outstanding issue.

New interim CEO Ross Levinsohn has not been involved in the Alibaba deal in any significant way. But he certainly will benefit from its halo effect, if approved, especially given that it will likely boost Yahoo shares.

Next up for Levinsohn, who has just rejiggered Yahoo management again, other sources said, is an effort to settle the patent-infringement lawsuit with Facebook, and also to renegotiate its search deal with Microsoft.

And, oh yes, fix Yahoo’s rocky core-advertising business, which is still in distress and needs a major overhaul to push it back to growth.

But that, as they say, is yet another episode of Yahoo’s ongoing reality show.

Posting fourth-quarter earnings this morning, Sprint said it added 1.1 million total wireless subscribers, 58,000 of them two-year contract customers. Quite a milestone for a company that hasn’t seen a gain in postpaid subscribers in 13 quarters and a sign that Sprint may finally be turning a corner. Another good sign: Postpaid churn fell to 1.86 percent from 2.11 percent in the third quarter, and prepaid churn fell to 4.93 percent from 5.32 percent. And another: For the quarter, Sprint added almost 1.1 million wireless subscribers, its best showing in nearly five years.

All welcome news, even if Sprint is still losing money. The company reported a fourth-quarter loss of $929 million, or 31 cents a share, on revenue of $8.3 billion, up from $7.9 billion a year ago. Analysts polled by Thomson Reuters most recently forecast a loss of 30 cents a share on $8.15 billion in revenue. Said Bernstein analyst Craig Moffett, “Sprint CEO Dan Hesse might be forgiven for the temptation to hang a “Mission Accomplished” banner on the aircraft carrier that is Sprint. To his credit, he expressly declined to do so. Still, the company has at last achieved post-paid and total subscriber growth, customer service levels have improved, churn rates have been brought under control, and revenues were up.”

At $4.41, Sprint shares are up 1.15 percent in early trading as I write this.

With tablets running the Google mobile OS beginning to proliferate now, those days of Apple’s easy dominace of the market are winding down. Shipments of Android devices in the quarter, for example, leapt to 2.1 million units from about 100,000. “Apple’s volumes will continue to go up, but market share will inevitably go down,” Strategy Analytics’ director Neil Mawston told Bloomberg . “Even at $500 retail, based on some of the research we’ve done, that’s probably two or three times more than what most mass market consumers are expecting to pay….If you were to ask me in two years time will Apple have less than 50 percent of the global tablet market, I think that’s a certainty.”

Perhaps. Depends on how the competition shakes out, I suppose. And just how high Apple raises the bar for its rivals with the iPad 2.

UPDATE: It also depends on the manner in which the competition reports sales numbers. To wit, it turns out that those 2 million Galaxy Tabs Samsung sold were actually sold into the channel and not necessarily to consumers, suggesting that this spike in Android growth may not be quite what it seems.

The Dallas-based telecommunications company said Thursday it would now recognize gains and losses in the year in which they are incurred, using a practice called mark-to-market accounting, rather than spread them out over several years.

The accounting change clarifies one of the more volatile aspects of a large employer’s financial results, better tying performance to the current economic state. It would eliminate the “smoothing out” of gains and losses over several years. Under the old system, some of the pension-plan losses recorded during the stock market decline in 2008 would still be on the books for 2010.

AT&T joins a number of large U.S. corporations including Honeywell International, General Electric Co. and International Business Machines Corp. in revamping pension-accounting practices.

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Following the release, the company’s stock began a free fall, dropping 15.25 percent to $35.34 a share over concerns that the retailer is losing market share to Amazon, Target, Wal-Mart and others.

What’s worse is that the retailer appears to be one of a few that is not seeing this year’s goodwill. ComScore is reporting big online sales gains this year compared to last year, and the Commerce Department said today that retail sales rose for a fifth straight month in November due to increasing consumer confidence.

Meanwhile, Best Buy reported a 4.4 percent drop in quarterly profits, and was forced to lower its per-share profit forecast for the year to the range of $3.20 to $3.40, which is down from its previous guidance of $3.55 to $3.70 a share.

In the three months ended Nov. 27, Best Buy reported $11.9 billion in revenues, falling from $12.02 billion in the same period a year ago. Net income fell to $217 million from $227 million in the same period last year.

In the quarter, Best Buy said sales of TVs declined in the U.S., but the loss was partially offset by an increase in smartphones and tablet computers. Best Buy faces stiff competition from retailers such as Wal-Mart, Amazon, Target and GameStop, which were more aggressive on pricing. The Wall Street Journal reports that the company surrendered 110 basis points of market share in the most recent quarter.

An ominous threat, but one not likely to be carried out. Sirius said back in February that it would appeal such a delisting notice and seek an extension from Nasdaq, and that’s exactly what the company is doing.

In a press release announcing the notice, Sirius said it will request a hearing before a Nasdaq Listing Qualifications Panel and petition it for a continued listing pending its return to compliance (SatWaves has a good overview of how this will play out). And the company seems quite confident it will get the hearing.

“SIRIUS XM is one of the most liquid securities on The NASDAQ Global Select Market,” Sirius CEO Mel Karmazin said in a statement. “We have a large investor base consisting of both individual and prominent institutional stockholders; and our equity capitalization is greater than approximately 92 percent of the companies listed on The NASDAQ Global Select Market. We are committed to remaining listed on The NASDAQ Global Select Market.”

Frankly, with over 3.7 billion shares outstanding, there’s little reason to fear Sirius will be booted from Nasdaq. And if you do harbor such fears, consider this: A few days ago the exchange added Sirius to its Nasdaq Q-50 Index, which, according to the release announcing it, “is designed to track the performance of the 50 securities that are next in line to replace the securities currently included in the NASDAQ-100 Index.” If Nasdaq were truly preparing to delist Sirius, why would it bother adding the company to the Q-50?

Ugly times. But what a difference a year makes.

Microsoft (MSFT) just reported earnings for its second fiscal quarter, posting significant gains in sales and profits. Net income for the period rose to $6.66 billion, or 74 cents a share, from $4.17 billion, or 47 cents a share in the same period last year. Meanwhile, revenue rose 14 percent to $19.02 billion. Analysts had been expecting earnings of 59 cents a share, and $17.9 billion in revenue.

“Exceptional demand for Windows 7 led to the positive top-line growth for the company,” chief financial officer Peter Klein said in a statement. “Our continuing commitment to managing costs allowed us to drive earnings performance ahead of the revenue growth.”

The release below. Kara Swisher will be covering Microsoft’s earnings over at BoomTown later this afternoon.

Microsoft Reports Record Second-Quarter Results

REDMOND, Wash., Jan 28, 2010 — Microsoft Corp. today announced record revenue of $19.02 billion for the second quarter ended Dec. 31, 2009, a 14% increase from the same period of the prior year. Operating income, net income and diluted earnings per share for the quarter were $8.51 billion, $6.66 billion and $0.74 per share, which represented increases of 43%, 60% and 57%, respectively, when compared with the prior year period.

These financial results include the recognition of $1.71 billion of deferred revenue, an impact of $0.14 of diluted earnings per share, relating to the Windows 7 Upgrade Option Program and pre-sales of Windows 7 to OEMs and retailers before general availability. Adjusting for the deferred revenue recognition, second-quarter revenue totaled $17.31 billion, and diluted earnings per share totaled $0.60 per share.

“Exceptional demand for Windows 7 led to the positive top-line growth for the company,” said Peter Klein, chief financial officer at Microsoft. “Our continuing commitment to managing costs allowed us to drive earnings performance ahead of the revenue growth.”

Windows 7 and Windows Server 2008 R2 launched globally on October 22 as anticipated. Through the second quarter, Microsoft has sold over 60 million Windows 7 licenses making it the fastest selling operating system in history.

“This is a record quarter for Windows units,” said Kevin Turner, chief operating officer at Microsoft. “We are thrilled by the consumer reception to Windows 7 and by business enthusiasm to adopt Windows 7.”

Business Outlook

Management will discuss second-quarter results and the company’s business outlook on a conference call and webcast at 2:30 p.m. PST (5:30 p.m. EST) today.

In addition, Microsoft offers operating expense guidance of $26.2 billion to $26.5 billion, for the full year ending June 30, 2010.

“Notwithstanding the slow recovery of demand from the enterprise sector, we are encouraged that industry momentum has turned positive following the steepest downturn in more than a decade,” said SIA President George Scalise.

Great news were it not for the fact that at $19.1 billion, August sales were down a horrific 16.1 percent year-over-year. Furthermore, for the first eight months of 2009, sales are at $133.8 billion–about 21.3 percent below this time last year.

So while it’s wonderful that we’re seeing these sequential improvements, it’s important to remember that the industry is still fairly deep in the abyss and has a long way to go before it climbs out.

GE’s (GE) NBC Universal, for instance, just posted second-quarter results that were as bad as its first quarter. Jeff Zucker’s TV and movie unit said revenue was down eight percent and profit down 41 percent for the three months ending June 30; in the previous quarter, revenue was down only two percent, while profit was down 43 percent.

Per usual, GE said NBC’s cable business was doing okay (which makes sense since it gets a guaranteed income stream from cable operators), but that its overall ad business and local TV markets were getting killed. Or in technical terms, they’re seeing “continued pressure.”

Three months ago, GE went out of its way to make the point that if you stripped out one-time charges like write-downs, its earnings drop would have only been in the 15-25 percent range. It may make the same argument again during the earnings call later this morning, so I’ll check back then.

UPDATE: Once again, NBC is arguing that its earnings aren’t that terrible. The company had to take nearly $100 million in charges this quarter, and last year it had some one-time gains. So really, the company argues, its earnings are down a mere 24 percent. Here’s the highlight reel from the earnings call. Note the lines about upfront sales being slow and Web display ads being hit. Click chart to enlarge.