NEW YORK (REUTERS) - Plans by Yahoo Inc's board to consider selling its struggling Internet business sent the company's shares up nearly 6 per cent on Wednesday, as investors cheered a potential new way to separate Yahoo's traditional services from its valuable investment in Chinese Web merchant Alibaba.

Yahoo's board is weighing the sale of the Internet business at a three-day board meeting starting on Wednesday, a source familiar with the matter told Reuters. The board did not reach a decision on Wednesday and will continue discussions on Thursday, CNBC reported.

Chief Executive Marissa Mayer's attempts to revive the traditional business have born little fruit, and almost all of Yahoo's market capitalisation of about US$34 billion is ascribed to its stakes in Chinese e-commerce company Alibaba Holding Group Ltd and Yahoo Japan Corp.

A separate Alibaba stake would be expected to be more highly valued by the market, but investors want to avoid a massive tax bill in the process. Selling the traditional business is seen as one way possibly to achieve that.

Broken out as a separate company, Yahoo's email, Yahoo and Tumblr web sites and mobile services could fetch between US$2 billion and US$8 billion, analysts and bankers said, many seeing US$4 billion as the likely price.

After such a sale, all that would be left, essentially, is the Alibaba and Yahoo Japan stakes. "Realising value is far from assured, however," Pivotal analyst Brian Wieser wrote in a note. "The big question is whether anyone would actually show up with a meaningful bid." Interested bidders could range from private equity companies attracted to Yahoo's still-huge base of customers to technology companies eager for Yahoo's mobile and web content, following the model of Verizon Communications Inc buying AOL.

The Wall Street Journal said potential bidders could include Verizon and IAC/InterActiveCorp. A source familiar with Verizon's thinking said currently there were no talks between the companies. IAC did not immediately respond to a request for comment.

The Journal, which first reported that Yahoo might sell its Internet business, also reported on Tuesday that the board meeting would discuss how to proceed with the spinoff of the company's 15 percent stake in Alibaba, worth more than US$30 billion if held separately.

Yahoo's Internet business has been struggling to boost revenue from ad sales in the face of stiff competition from Alphabet Inc's Google and Facebook.

According to a person familiar with the matter, activist investor Starboard Value LP is also disappointed in Yahoo's performance under Mayer and has lost confidence in the CEO. Starboard attributes the relatively low price of the Internet business to poor management of the division by Mayer and the Yahoo management team.

The company's emerging businesses, which Mayer calls Mavens - mobile, video, native and social advertising - have been the bright spot for the company. "To me that would be most valuable to sell," said Ivan Feinseth, an analyst at Tigress Financial Partners. "I think private equity would be interested in the Mavens businesses," he said.

Starboard asked Yahoo in November to drop plans to spin off its stake in Alibaba due to the tax concerns, and urged the company to sell its core search and display advertising businesses instead.

Yahoo shares closed up 5.8 per cent at US$35.65 on Nasdaq.