Yahoo and Microsoft have resumed talks in the wake of a shareholder rebellion launched by billionaire investor Carl Icahn, but this time the discussions are focusing on a deal short of outright acquisition.

Neither company would confirm the details Sunday, but there were reports that Microsoft was proposing an arrangement focused only on Yahoo’s search advertising business.

Microsoft announced the discussions in a brief statement around midday Sunday. Yahoo had no immediate comment, although its senior managers are to meet today.

Last week, Icahn launched an effort to oust Yahoo’s board and replace it with his own slate of directors who would favor a Microsoft takeover. Microsoft had earlier walked away from a $47.5 billion offer to buy Yahoo, after the Sunnyvale search firm’s chief executive, Jerry Yang, rejected the deal.

As recently as Friday, Microsoft executives were saying publicly that the company had “moved on” from the idea of buying Yahoo. But in its Sunday statement, Microsoft said it’s now contemplating a different kind of transaction.

“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!” the statement said.

“Microsoft is not proposing to make a new bid to acquire all of Yahoo! at this time,” the statement continued, “but reserves the right to reconsider that alternative, depending on future developments or discussions that may take place with Yahoo! or discussions with shareholders of Yahoo! or Microsoft or with other third parties.”

The Redmond, Wash.-based software giant had wanted to acquire Yahoo in order to compete more directly with Google. Yahoo is currently ranked second in the lucrative Internet search advertising business, behind Google, with Microsoft a distant third.

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Source: mercurynews.com

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