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Yahoo cuts off talks with Microsoft and turns to Google

Yahoo cut off all merger talks with Microsoft last night claiming that Microsoft no longer wished to but the internet provider outright and were only interested in Yahoo's search business. Instead Yahoo has clinched a search advertising deal with Google.

Microsoft's bid to but Yahoo outright was rejected in May and since that point the two companies had discussed the idea of a joint venture to challenge Google's hegemony of the search engine market. But Yahoo has stated that the deal proposed by Microsoft would have left the internet provider without an independent search business which is seen as fundamental to Yahoo's future.

The deal with Google should see Yahoo increase its coffers by $800m per annum. But the move is also something of an admission of defeat by the Yahoo. The failed deal with Microsoft was Yahoo's last real possibility to challenge market leader Google.

The news of a deal with Google is bound to anger billionaire shareholder Carl Icahn who has been involved in a public war of words with the current Yahoo board of directors. Under the new deal Yahoo will display Google ads inside Yahoo search results in North America.

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