Microsoft, Yahoo Said to Be Near Agreement for Web-Search Ads

Microsoft Corp. and Yahoo! Inc. are getting closer to signing an Internet-search partnership to challenge market leader Google Inc., a person familiar with the matter said.

An agreement may be announced as soon as today, said the person, who declined to be identified because the talks are private. The partnership would involve the companies sharing revenue from Web-search ads, the person said.

Microsoft, the world’s largest software maker, is seeking more users for its Bing Internet search engine, which has about an eighth of Google Inc.’s market share in the U.S., according to research firm ComScore Inc. Yahoo, which has posted three straight quarters of sales declines, may be able to save at least $500 million by working with Microsoft, Yahoo Chief Executive Officer Carol Bartz said in June.

Google had about 65 percent of the U.S. Web-search market in June, according to Reston, Virginia-based ComScore. Yahoo and Microsoft had 28 percent combined.

Adam Sohn, a spokesman for Redmond, Washington-based Microsoft, declined to comment. Kim Rubey, a spokeswoman for Sunnyvale, California-based Yahoo, also wouldn’t comment.

Microsoft rose 36 cents to $23.47 yesterday in Nasdaq Stock Market trading. The shares have jumped 21 percent in 2009. Yahoo, up 41 percent this year, added 22 cents to $17.22.

Abandoned Bid

Bartz confirmed in May that the companies were holding discussions. Microsoft CEO Steve Ballmer has said repeatedly since last year that Microsoft would be interested in a partnership with Yahoo. Microsoft abandoned a $47.5 billion takeover bid for all of Yahoo last year.

An agreement between the companies may attract regulatory scrutiny in the U.S. and Europe, said Colin Gillis, an analyst with Brigantine Advisors in New York. He recommends selling Yahoo shares.

“We would be more supportive of an agreement if not for our regulatory concerns,” Gillis said. “Yahoo search is in a decline that may not reverse.”

Revenue from Web-search ads on Yahoo’s pages declined 15 percent in the second quarter, the company said last week. Total revenue fell 13 percent to $1.57 billion. Sales in Microsoft’s online unit also declined for the quarter ended June 30, falling 13 percent to $731 million. link...