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The successful completion of the current talks would mark an end to Microsoft’s 18-month pursuit of Yahoo, which began with an unsolicited full takeover bid that rocked the Internet world. Since last summer, the software giant has been pushing for a looser alliance that would combine the search technology and search advertising systems of the two companies and give them a better chance to catch up with Google. The talks picked up steam late last week after the two sides reached the outlines of a deal in which Yahoo would not receive any up-front payment, as Microsoft had initially offered in the middle of last year, but the two sides would divide future search advertising revenues. For Yahoo, the partnership would bring an influx of cash at a time of declining revenue in its search business. Carol Bartz, brought in as chief executive from outside the company after the debacle of last year’s public break-up of the Microsoft talks, has continued to pare staff since taking over in January.

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Microsoft and Yahoo have restarted talks about forging an internet partnership, raising the possibility of a new alliance to counter Google’s growing influence over the online world. News of the discussions was confirmed by one person familiar with the discussions, though neither company would comment on the talks. Carol Bartz, Yahoo’s chief executive, and Steve Ballmer, her counterpart at Microsoft, have started the talks in recent days, though no formal proposals have been developed and the discussions are at a very early stage, this person said. The latest discussions have involved a wide range of possible outcomes that would lead to ways of combining or pooling some of the internet assets of the two companies, according to the person familiar with the discussions. They have yet to focus on any one preferred direction, the person said.

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