Microsoft to Yahoo: We're Ba-a-ack!

We stated here last Friday that other partnership deals were in the works at Yahoo, and over the weekend, one of the big ones came to light.

Just two weeks after abandoning its hostile takeover attempt, Microsoft announced the two companies are discussing an online advertising partnership. There are a number of ways to look at this development.

• Microsoft doesn't have any other viable channel to try and gain ground on Google except for Yahoo.

• With Carl Icahn snapping at its heels, Yahoo desperately needs a big partnership of the sort Microsoft can offer.

• Microsoft is apprehensive that Yahoo and Google might form a partnership such as the two-week "experiment" conducted just before Yahoo's Q-1 earnings were announced.

• Once Microsoft withdrew its takeover attempt, Yahoo's management suffered a bout of "seller's remorse." After all, Jerry Yang flew to Seattle at the last minute to bargain over price, but he asked for more than the software giant was willing to pay.

In an internal memo to employees this weekend, Microsoft executive Kevin Johnson conveyed a sense of urgency. "Regardless of the outcome of any new discussions," he wrote, "it is important that we continue to move forward to strengthen our online services business. The fact is that we are not where we want to be in this business yet and we've been in this position longer than we'd all like."

Yahoo, meanwhile, released a bland statement late on Sunday : "Yahoo's board of directors will evaluate each of our alternatives, including any Microsoft proposal, consistent with its fiduciary duties, with a focus on maximizing stockholder value." In other words, blah, blah, blah -- and stay tuned.