Source: Microsoft, Yahoo Deal Done

Microsoft Corp. and Yahoo Inc. have reached a deal to make their two instant messaging programs work together, in a partnership that could provide a challenge to market leader America Online, people familiar with the situation said Tuesday.

The deal was expected to be announced early Wednesday, the two sources told The Associated Press.

One of the sources works closely with Microsoft and has been involved in company discussions. The other is familiar with the deal. Both spoke on condition of anonymity.

The agreement would allow users of both services to send and receive messages, regardless of which system they were using. Previously, the systems did not work with each other.

Redmond-based Microsoft has long sought to forge some sort of deal to boost the profile of MSN Messenger. The company also has been in talks with AOL over possible partnerships with Microsoft's MSN online unit, although it's not clear where those talks stand now.

Spokesmen for Microsoft, Yahoo and AOL declined to comment.

AOL's instant-messaging product, AIM, had more than 53 million unique U.S. users in August, compared to about 29 million for the competing MSN Messenger and 23 million for Yahoo's Messenger, according to Nielsen/NetRatings.

Microsoft already has a product that lets business users send and receive messages from Yahoo Inc., AOL and Microsoft's instant messaging systems. But the product does not extend to consumer users.

Other instant messaging products, such as Trillian, allow people to send and receive messages from multiple messengers.