Well, it's official, Microsoft and Yahoo have come to an agreement.
On lunch.
As first noted by Valleywag, Microsoft CEO Steve Ballmer and Yahoo Chairman Roy Bostock had lunch together this week in New York. The New York Times has a lengthy piece up now as well, confirming the meeting, but offering no clue as to what happened beyond, presumably, caloric consumption.
In any case, it's the second high-level contact this week, given that incoming Yahoo CEO Carol Bartz told employees that she, too, had talked with Ballmer.
Microsoft has made it clear in every way imaginable that it would like to do a search deal, but it remains less clear whether Yahoo is willing to take the relationship beyond the "lunch date" stage.
Updated 10:10 p.m., with additional comments from a source.
While it's not certain that the appointment of Carol Bartz will ensure a Yahoo-Microsoft deal happens, one thing is clear: nothing was going to happen until Yahoo picked its new chief executive.
With reports that Yahoo is going to name the former Autodesk chief to fill Jerry Yang's spot, discussion logically shifts to whether the long-anticipated Microsoft-Yahoo search deal will now come to fruition.
Microsoft CEO Steve Ballmer has repeatedly said that he remains interested in a search partnership, but noted in an interview last week that it was hard to gauge where things were at with Yahoo amid its CEO search.
"No way to handicap it," he said, when asked how likely a search deal was. "I think at this stage, it's probably fair to say I'm not even sure Yahoo would handicap it."
Although it is always tough to gauge where Yahoo's board is, clearly in Bartz, Yahoo would be getting someone who knows what it is like to partner with Microsoft. (To see Bartz talking about Microsoft and other topics, check out this CNET video package.)
Some analysts have suggested that perhaps the biggest upside to Bartz's appointment would be that it makes a Microsoft deal more likely.
"Yahoo needed a CEO who buys a likely search deal with Microsoft at a philosophical level," Collins Stewart analyst Sandeep Aggarwal said in an interview with CNET News. "Carol likely fits that requirement."
All Things D's Kara Swisher reports that Microsoft has a search deal proposal practically ready to hand over to Yahoo. Swisher said a deal could even be ready in time for Yahoo's earnings report on January 27.
I'm still trying to get confirmation on that front.
Update: No word from Microsoft, but Yahoo's board is apparently aiming to keep its door open.
"It depends on their offer," said a source familiar with the board's thinking. "If they were to come to (Yahoo) with an offer of $33 a share, (the company) would be stupid if to say 'no' now."
CNET News' Dawn Kawamoto contributed to this report.
Updated 6:15 AM PST November 30
According to one report, Yahoo and Microsoft may once again be working on a search deal.
The Times of London reported this weekend that Microsoft is in talks to acquire Yahoo's search business for $20 billion. According to the paper, former AOL CEO Jonathan Miller and fomer Fox Interactive President Ross Levinsohn are set to head the effort.
"Senior directors at Microsoft and Yahoo are understood to have agreed the broad terms of a deal, but there is no guarantee that it will succeed," The Times said in its report.
Microsoft declined to comment on the report. It is worth noting that as of Friday, the market capitalization of Yahoo in its entirety was just shy of $16 billion. Microsoft was once willing to pay far more to get Yahoo, but a lot has changed since the early part of the year.
Since Microsoft made its last offer for Yahoo, Yahoo and Google have announced and abandoned a search deal, Yahoo's shares have plummeted to single digits, and the company has said it would replace Jerry Yang as CEO.
In the days following the Yang announcement, Microsoft CEO Steve Ballmer indicated that the company was decidedly not interested in a full acquisition of Yahoo but said that some sort of search partnership remained "an interesting possibility." CNET had earlier reported Microsoft's continuing interest in such a deal.
Update:Kara Swisher of D: All Things Digital talked to Ross Levinsohn, who the Times of London said would be involved in the $20 billion deal. He told her the report was "total fiction," and sources from Yahoo and Microsoft denied such a deal was in the works. Of course, this series of denials doesn't mean that a search deal between Yahoo and Microsoft isn't a real possibility in the near future.
Microsoft CEO Steve Ballmer threw his daily bucket of cold water on the notion that the software maker will return with a new bid for all of Yahoo.
"We are done with all acquisition discussions with Yahoo," Ballmer said, adding that he has said this a bunch of times but that some people remain "confused."
"We did our best," he said. "We've moved on."
His comments came at the company's annual shareholders meeting Wednesday in Bellevue, Wash., not far from the company's Redmond headquarters. Ballmer, whose address was offered live via Webcast, made no reference to Yahoo in his prepared remarks, but it was the first shareholder question.
Speculation was rekindled this week after Yahoo announced that it is searching for a new CEO to replace Jerry Yang, who will step down once the new executive is hired.
Yahoo's shares plummeted Wednesday in response to Ballmer's comments, falling about 15 percent to $9.79 a share in morning trading. The reaction comes just a day after Yahoo's shares jumped as high as 16 percent in intraday trading, following the news about Yang.
While Ballmer rejected the notion that Microsoft would return with a new offer to buy Yahoo, he reiterated that the idea of a search partnership remains "an interesting possibility."
"There's no active discussion on that front, but we'd be very open to it," Ballmer said.
Dawn Kawamoto of CNET News contributed to this report.
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