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Yahoo! and eBay talks reported dead

The Financial Times says merger talks between the online giants broke down over eBay's multiyear agreement with AOL

Internet auctioneer eBay and Web portal Yahoo! held talks about possible partnerships, but the discussions between the two companies -- which had been of a preliminary nature -- ended last week, according to a published report.

eBay shares surged in late trading on Tuesday after CNBC reported that eBay and Yahoo! were discussing various forms of partnership. The Wall Street Journal's Steve Frank, appearing on CNBC, said that although no agreement appeared imminent, one person close to the companies said there was a 50-50 chance of a "deep partnership" being struck in the next two weeks, as well as a significantly smaller chance that the talks would lead to a full-fledged acquisition of eBay by Yahoo!

Yahoo! and eBay officials declined to comment on what they characterised as rumour and speculation. According to the CNBC report on Tuesday, the talks were no more significant than those it holds routinely with other companies.

However, The Financial Times on Wednesday, quoting people familiar with the situation, said that talks between Yahoo! and eBay had ended last week without agreement. The paper reported that the companies discussed a range of possibilities, ranging from a partnership to a merger, although the latter option was not thought to have been high on the agenda.

One major stumbling block is that eBay is currently involved in a multiyear agreement with Yahoo!'s big rival, America Online (AOL), to share services. eBay gets access to AOL's 22 million subscribers in return for AOL customers getting better access to the eBay auctions. People close to eBay say it has also considered some sort of deeper partnership with AOL.

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