Yahoo! turns to Microsoft as Google walks away

In an extraordinary volte-face, Yahoo! CEO Jerry Yang has said a deal with Microsoft is still an option after Google walked away from its advertising deal with the struggling web firm, which faced strong opposition from US anti-trust regulators.

Google and Yahoo! abandoned their advertising deal after the US Department of Justice informed the companies that it would file an antitrust lawsuit to block the agreement if it was implemented.

In a statement, the department said that together with the number one and two search companies it would account for 90% or more of the market share and the deal would likely hurt competition.

Speaking at a conference after the search deal had been axed, Yang said that he would be willing to sell his company to Microsoft.

Yang had come under criticism for blocking Microsoft's bid to purchase his company a year ago, and looked to Google to avoid having its search business eaten up by Microsoft in May.

However, Yang said he remains open-minded about a deal with Microsoft having bitterly opposed the software giant's initial takeover bid.

Yang is still also reported to be talking with Time Warner to unload Yahoo!'s AOL business.

Although Yahoo!'s stock price is far from the $31 (£19) per share price Microsoft offered last year, its stock rose 4.27% to $13.92 (£8.72) after Google adbandoned the agreement yesterday.

In a statement Yahoo!, said: "Yahoo! continues to believe in the benefits of the agreement and is disappointed that Google has elected to withdraw from the agreement rather than defend it in court."

Earlier this week, the two companies announced that they were making a last-ditch attempt to win approval for their proposed search advertising deal by cutting its length from 10 years to two.

The revisions also put a 25% cap on the percentage of Yahoo! search revenue that can be generated from Google and would allow Google advertisers to opt out of appearing on Yahoo!

In a blog post, Google senior vice president, David Drummond, said: "We're of course disappointed that this deal won't be moving ahead. But we're not going to let the prospect of a lengthy legal battle distract us from our core mission.

"That would be like trying to drive down the road of innovation with the parking break on."

Google and Yahoo! originally sought a deal in June but delayed implementation to allow the Justice Department review antitrust regulations.

The agreement was also fiercely decried by advertising bodies around the globe including the World Association of Newspapers and National Association of Advertisers.

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