Microsoft and Yahoo: A new deal in the works?

Microsoft is talking to Yahoo again -- but not about an acquisition of all of Yahoo this time around. The pair are back to discussing some other kind of transaction that would involve the two companies.

Microsoft is talking to Yahoo again -- but not about an acquisition of all of Yahoo this time around. The pair are back to discussing some other kind of transaction that could involve the two companies.

Here's Microsoft's official statement on the matter:

“In light of developments since the withdrawal of the Microsoft proposal to acquire Yahoo! Inc., Microsoft announced that it is continuing to explore and pursue its alternatives to improve and expand its online services and advertising business. Microsoft is considering and has raised with Yahoo! an alternative that would involve a transaction with Yahoo! but not an acquisition of all of Yahoo! Microsoft is not proposing to make a new bid to acquire all of Yahoo! at this time, but reserves the right to reconsider that alternative depending on future developments and discussions that may take place with Yahoo! or discussions with shareholders of Yahoo! or Microsoft or with other third parties.

“There of course can be no assurance that any transaction will result from these discussions.”

Remember: Before Microsoft made its bid earlier this year to acquire Yahoo, it had tried to form various partnerships and deals with Yahoo. So it sounds like we're back to square one, with one major difference: Yahoo is not in a powerful bargaining position this time around. Yahoo tried to find a white knight to save it from Microsoft and came up empty-handed. And its shareholders are none too happy.

But Microsoft also seemingly still needs Yahoo. Something spooked CEO Steve Ballmer & Co. enough for Microsoft to walk away from shelling out an extra $4 billion to $5 billion to buy Yahoo earlier this month. But Microsoft is having no luck growing its search share and is finding it to be slow going to extend the family of Web sites and properties that it can offer as potential ad platforms to advertisers. On the eve of Microsoft's annual ad summit, which happens this week in Redmond, Microsoft Platforms & Services Chief Kevin Johnson sent an e-mail to employees on May 18 stating the Microsoft is planning to stay the onlin-ad course.

What kind of a deal do you think Yahoo and Microsoft are discussing?