In line with my expectations (ref. to my blog post on May 4th 2008 – Microsoft walks away from Yahoo deal) that walking away from the deal was just a temporary ploy adopted by Microsoft, major news papers have today reported that Yahoo and Microsoft have resumed talks in the wake of a shareholder rebellion launched by billionaire investor Carl Icahn.

However, this time the discussions are focusing on a deal short of outright acquisition. Microsoft announced the discussions in a brief statement that it made on Sunday.

The press reported that Microsoft was proposing an arrangement focused only on Yahoo’s search advertising business.

Makes sense doesn’t it? They need to compete with Google and its Adwords program and Microsoft’s Adcenter isn’t really doing too well.

Well, I guess it promises to be a long, exciting and complicated battle, but I still week Microsoft may get Yahoo in the end.

With Microsoft announcing that it no longer wishes to persue the acquisition of Yahoo, what promised to be the year’s most talked about blockbuster deal may have ended in a little more than a whimper. But… has it really ended or is it a ploy by Microsoft to wait till the Yahoo stock plunges and then rebid at a lower price?

If major newswires are to be believed, at Yahoo, Jerry Yang is most likely to face several angry share holders who believed that he should have accepted Microsoft’s offer. On his part, Jerry Yang has been quoted as saying, “with the distraction of Microsoft’s unsolicited proposal now behind us, we will be able to focus all of our energies on executing the most important transition in our history”. I wonder what that transition is?

From a paid search advertising perspective one only hopes that they improve their own offering instead of selling out to Google’s Adwords program. If they do decide to tie up with Google, then Google Adwords will have a virtual monopoly in the paid search advertising space and that would be quite sad.

Whatever it is that ultimately happens… the future promises to be interesting!!!