Is a Microsoft Search Deal With Yahoo "Ticked and Tied"?

Several sources close to Yahoo and Microsoft have told BoomTown that a search partnership deal between the companies is more likely to be signed quickly now that Yahoo has picked former Autodesk (ADSK) CEO Carol Bartz as its next CEO.

Such a deal, which the pair have tried unsuccessfully to strike many times, would be a big boost to Bartz, who is coming into a very difficult turnaround situation at the troubled Internet concern.

Sources close to Microsoft (MSFT) said the company has readied its proposal to be floated to the Yahoo (YHOO) board. And CEO Steve Ballmer has been vocal in recent months about wanting to do a deal quickly.

“It’s ticked and tied,” said one person who has spoken to Microsoft execs of late and who predicted it could be signed as soon as Yahoo’s earnings report on Jan. 27.

Said another source at the software giant: “We’ve just been waiting for management clarity to move.”

BoomTown could not get further details about the proposal, but it is likely to be similar to past ones Microsoft has offered, with a small payment upfront and a long-term and large amount of guaranteed revenue.

Last June, for example, Microsoft offered Yahoo a hefty payday, as outlined in a letter from then-Microsoft exec Kevin Johnson.

He said Microsoft would have invested $8 billion in Yahoo at $35 a share, purchased Yahoo’s search assets for $1 billion and assumed the operations and R&D expense while returning data back to Yahoo for use in its advertising business. The two companies, Johnson noted, would have entered into a long-term search partnership, where Microsoft would have provided “favorable economics” to Yahoo search, including a three-year guarantee of higher monetization than Yahoo’s Panama paid search system currently provides.

While some on the Yahoo board, including Yang, remain on the fence about Yahoo essentially outsourcing its search business to Microsoft in exchange for a big pile of money, this seems to be the company’s only choice.

Bartz must also weigh in, of course, and she is someone who has more of an affinity for techies and might think Yahoo can continue to compete in what is turning into a pricey arms race in search between Microsoft and Google (GOOG).

In any case, most agree that a union is likelier than not, and is a question of when, not if.

Most importantly, after the failed takeover attempt of Yahoo by Microsoft, aimed at acquiring its search business, the pair have only lost more market share to the hugely dominant Google.

Yahoo’s attempt to strike a search deal with Google collapsed over regulatory concerns.

Given how small the Microsoft-Yahoo search combination is in comparison to Google’s market share of 72 percent, the two companies are less likely to encounter such difficulties.