Microsoft, Yahoo Rekindle Partnership Talks

Microsoft and Yahoo have renewed on-again, off-again negotiations aimed at forging an Internet advertising partnership between the two tech companies, according to published reports.

Microsoft CEO Steve Ballmer and Yahoo chief executive Carol Bartz have met personally to discuss such a pact in recent weeks, The Wall Street Journal and New York Times reported on Friday, citing unnamed sources.

According to the Journal, one idea in play is an arrangement that would see Microsoft turn over its Internet display operations to Yahoo, the market leader in the online display ad category. "This would likely be part of a broader collaboration that includes the much-larger search advertising market," the newspaper reported.

Google maintains a significant lead over both Microsoft and Yahoo in the search ad market.

As recently as last month, Ballmer said that he remains interested in acquiring Yahoo's Internet search and advertising unit. "Over time, there's still a good opportunity to do a deal," said Ballmer, speaking at a March 19 media summit in New York City.

Ballmer's remarks reinforced comments made in January by Bartz, who replaced Jerry Yang atop Yahoo earlier this year, indicating a Microsoft-Yahoo deal might still be on the table. Bartz told her employees that she would investigate whether a sale of Yahoo's search business made sense.

Ballmer said repeatedly in late 2008 that Microsoft was no longer interested in acquiring all of Yahoo, but that the company is open to a narrower deal. Adding Yahoo's search operations to its MSN and Live Search network could help Microsoft close the gap with industry leader Google.

Yahoo is currently the No. 2 player, with Microsoft a perennial third despite recent acquisitions -- including a $1.2 billion deal for Norway's Fast Search & Transfer -- meant to bolster the company's position.

Adding to speculation that Microsoft is still intent on integrating Yahoo's search operations is the company's December hiring of Qi Lu, who was Yahoo's engineering VP for search and advertising technology. Microsoft named Lu head of its online services unit.

Microsoft last year offered to purchase Yahoo for $31 per share, but talks between the companies ultimately broke off amid growing animosity between Ballmer and then Yahoo CEO Yang.

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