Microsoft has held discussions to buy a stake in Yahoo to compete against Google, the Wall Street Journal reported on Wednesday.
Although talks over an equity stake do not appear to be active, Microsoft's top management remains open to a deal with Yahoo as pressure grows from shareholders to perform better against Google, the newspaper said, citing people familiar with the situation.
Microsoft and Yahoo have discussed possible options over the past year, the newspaper said. Microsoft could sell its MSN online network to Yahoo and take a minority stake in the Internet portal, it said.
Microsoft and Yahoo declined to comment on the report.
Last year, Microsoft had been negotiating to strike a partnership
with Time Warner's AOL Internet unit, but was shut out when Google agreed to invest
in a 5 percent stake in the AOL. Microsoft had been in talks with AOL to use its search technology, which would have given the software giant's fledgling paid-search business a big boost.
This is not the first time Yahoo and Microsoft are in talks for possible collaborations. Yahoo and Microsoft agreed
last October to connect users of their consumer instant messaging services, giving MSN Messenger and Yahoo! Messenger users the ability to interact with each other.
In an interesting turn, however, Microsoft said on Wednesday it switched to its own online ad brokering service called adCenter, so advertisers can directly place ads on the software maker's search sites instead of going through Yahoo.
Until now, advertisers bought pay-per-click ads on MSN search through Yahoo's Overture service until last year, but adCenter handled an increasing percentage of those transactions during testing in recent months.
AdCenter will be initially limited to paid search, but Microsoft envisions the service being a one-stop shop for online advertising across many of the company's software platforms including Xbox games and mobile phones.
The brokering service is expected to eventually allow advertisers to place advertisements on Microsoft's Internet services sites, such as Windows Live e-mail or Office Live.
Analysts said Microsoft planned to spend an additional $2 billion in the coming fiscal year starting July 1, speculating that much of that investment would go toward building an ad-supported
online service business.