Microsoft working on new Yahoo deal
UPDATE: Microsoft maybe working on a new partnership or joint venture with Yahoo for search-related advertising.
Such an arrangement could leave Yahoo free to continue operating other aspects of its advertising, content pages, e-mail service and other types of business.
Yahoo recently tested a similar arrangement with Google, in which Yahoo displayed Google ads on its popular Web properties and shared revenue from those ads with Google. Microsoft CEO Steve Ballmer had reacted to that test with dismay, citing it as one of his reasons for terminating negotiations with Yahoo's board.
Google had no comment on Microsoft's announcement Sunday.
It wouldn't be the first time that Microsoft has raised the idea of a partnership or purchase focused only on Yahoo's search business. Former Yahoo Chief Executive Terry Semel confirmed publicly two years ago that Microsoft had proposed buying a stake in Yahoo's search operation.
At the time, Semel was widely quoted as saying, "I will not sell a piece of search. It is like selling your right arm while keeping your left. It does not make any sense."
But one analyst said an agreement that focused on Yahoo's search advertising could make sense now.
"It actually could be a clever move," said Jeffrey Lindsay, an analyst at Sanford C. Bernstein. "It could be a face-saving way out for both sides."
Previously, Microsoft says it's working on a new deal with Yahoo.
Microsoft has said it is considering a deal with Yahoo which would not involve a full buyout of the company.
Microsoft's previous offer to buy Yahoo for $33 a share - a figure which valued the company at $47.5bn (£24.36bn) - was turned down.
Last week Yahoo rebuffed billionaire investor Carl Icahn's plan to oust the current board over the failed merger.
Now Microsoft says it is discussing with Yahoo an alternative transaction, but did not provide any detail.
In a statement, Microsoft said it "is not proposing to make a new bid to acquire all of Yahoo at this time, but reserves the right to reconsider that alternative".
It issued the statement, it said, "in light of developments" since the company withdrew its bid two weeks ago.
Microsoft stressed that a deal may or may not follow from Sunday's statement.
Analysts say any agreement could save Yahoo from having to fight a battle with Mr Icahn, who is amassing a stake in the company in an attempt to force out the current board.
Mr Icahn's manoeuvre on Thursday followed much anger and criticism over Yahoo's decision, led by co-founder and chief executive Jerry Yang, to turn down Microsoft's offer earlier this month to buy the company.