Yahoo makes Google ad deal; says talks with Microsoft are dead

Yahoo Inc. said Thursday it is entering a non-exclusive partnership on search advertising with archrival Google, hours after saying any chance of a deal with software maker Microsoft is dead.

Under the agreement, Yahoo can run ads supplied by Google alongside its own search results and on some of its websites in the United States and Canada.  

Microsoft "unequivocally" said on June 8 at a high-level meeting that it has no interest in "pursuing an acquisition of all of Yahoo, even at the price range it had previously suggested," Yahoo said in a release.

Initial talks on a Microsoft acquisition of Yahoo ended in May. Microsoft's last offer for Yahoo was $33 US a share, or roughly $47.5 billion in total. Yahoo sought a richer deal at $37 a share, but Microsoft balked.

However, just over two weeks later, the companies were talking again as Microsoft sought to buy Yahoo's online search operations.

On Thursday, Yahoo said it was unwilling to sell that piece of its business.

Microsoft issued a rebuttal, saying it was still open to buying part of Yahoo, but not the whole company.

Yahoo has been trying to ward off attempts by activist investor Carl Icahn to get a new slate of directors elected to the company's board over the handling of the Microsoft talks. Icahn wants Yahoo to sell to Microsoft, but with that option at a dead end, questions remain as to whether he'll be able to generate enough support at Yahoo's annual meeting on Aug. 1.

Yahoo's stock retreated sharply Thursday on news of the end of talks with Microsoft. It was off $2.56 US to close at $23.59 on Nasdaq, while Microsoft shares added $1.12 to close at $28.24.