Microsoft and Yahoo renew partnership talks

Microsoft and Yahoo have restarted talks about forging an internet partnership,
raising the possibility of a new alliance to counter Google’s increasing influence over the online world.

The talks were confirmed by one person familiar with the discussions, but neither company would comment.

Carol Bartz, Yahoo’s chief executive, and Steve Ballmer, her counterpart at Microsoft, have started the talks in recent days. No formal proposals have been developed and the discussions are at a very early stage, the person said.

The decision by Ms Bartz, who became Yahoo’s chief in January, to restart talks with the software group could be a watershed in lengthy, troubled man­oeuvring between the two companies since Microsoft launched an unexpected takeover bid early last year.

Recent discussions, first reported by the technology blog AllThingsD.com, have involved a wide range of possible outcomes that would combine or pool some internet assets of the two companies, the same person says, adding they have yet to identify a preferred direction.

Mr Ballmer has said several times in recent months that some combination of the companies’ internet search businesses was necessary if they were to have a chance to catch Google.

Microsoft last summer proposed a deal to take over Yahoo’s internet search business, in return for paying a share of advertising revenues to Yahoo. But Ms Bartz has said a presence in internet search could be strategically important for Yahoo.

Ms Bartz “doesn’t have a lot of pressure on her to do a deal today”, said Ellen Siminoff, an early Yahoo executive who founded search engine marketing firm Efficient Frontier.

Rather than take a major risk, Ms Bartz might opt first to combine with Microsoft in another region, perhaps Europe, where neither company is strong.