Discussions between Microsoft and Yahoo about a search partnership, while still preliminary, have taken place in recent weeks, according to a report on the All Things Digital Web site.
The talks have included a face-to-face meeting between Microsoft CEO Steve Ballmer and Yahoo CEO Carol Bartz, the report said. AllThingsD stressed that the talks are centered on what sort of search and advertising partnership might be possible, rather than an all-out acquisition.
Microsoft's position has strengthened somewhat in the past few months, with Redmond having hired a number of Yahoo's top search folks, including Qi Lu. The company has also grabbed a few business deals aimed at boosting its query share and begun testing of its next-generation search product, code-named Kumo.
But the software maker also needs the share boost that Yahoo could give it. Microsoft is preparing to back Kumo's launch with a big ad push and would benefit from spreading those costs over more than its current single-digit share of the market.
Yahoo, meanwhile, has held more than double Microsoft's share, but could be headed for a decline after losing several toolbar deals to Microsoft and Google. A report Thursday said the lost deals could cost the company as much as three percentage points of share, or 15 percent of its search volume.