Yahoo Says Sayanora To Microsoft

However, Yahoo is hedging its bets by reportedly talking with Google about a search advertising deal, according to Reuters.

Yahoo said that its dance with Microsoft ended after Yahoo's board of directors determined "that such a transaction would not be consistent with the company's view of the converging search and display marketplaces, would leave the company without an independent search business that it views as critical to its strategic future and would not be in the best interests of Yahoo! stockholders," said the company in a statement.

Apparently, shareholders are in disagreement; after Yahoo released its statement, shares fell 13 percent.

In reply to the latest Yahoo announcement, Microsoft said that thought the companies had continued to discuss an alternative transaction after Yahoo's initial rebuff of Microsoft's offer, it "was not interested in rebidding for all of Yahoo."

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Still, Microsoft said it was amenable to an "alternative transaction" of acquiring just Yahoo's search business.

Late Thursday the Silicon Alley Insider reported that a source confirmed that Yahoo and Google reached a search deal.

"The source believes that the deal will start small and ratchet up over time depending on its success. This makes sense, as a small deal will attract far less regulatory scrutiny. It will also contribute less to Yahoo's bottom line," reported Henry Blodget on the silicon Alley Insider.

It remains to be seen whether Microsoft will stay a jilted suitor or whether Google will fill Yahoo's dance card. Stay tuned.