Microsoft would still “like to sit down” with Yahoo! on search deal

The Times Online reports today in an interview with Microsoft COO Kevin Turner that the door is still open to a search deal with Yahoo!:

In an interview with The Times, Kevin Turner, chief operating officer of Microsoft, extended an olive branch to Carol Bartz, the new chief executive of Yahoo!, making it clear that a smaller deal regarding a partnership on search functions was still part of Microsoft’s thinking.

“They have a new CEO, and she’s formulating her business plans,” Mr Turner said.

“We’ve certainly made her aware and the Yahoo! board aware that if they are ever interested in an opportunity to partner with them on search, we’d like to sit down and at least have the conversation. It has to make economic sense to both parties.”

Microsoft has repeatedly said that a deal to buy Yahoo! is off the table.  It remains interested in a search deal, and there are at least some indications that Yahoo! may remain interested as well.  Bartz may be willing to talk, although privately, according to remarks she made at a Morgan Stanley Technology Conference in early March:

“I said this to Mr. Ballmer, I will not negotiate with you and 30,000 of my closest friends. I will negotiate privately,” said Bartz, adding to investors, “If something happens, you will know about it then.”

Last week Yahoo! reverted on some changes it had made to its employee severance plan in the heat of last year’s takeover attempt by Microsoft, and settled a lawsuit brought by Yahoo! investors over the severance plan.  Lawyer for the Yahoo! investors Joel Friedlander thinks the settlement could help a Microsoft – Yahoo! search deal:

Friedlander also noted that Microsoft officials saw Yahoo’s revised severance plan as creating “bad retention,” according to court papers unsealed in the case.

“The plan was an attempt to gum up an acquisition by Microsoft,” he said. The accord “makes a search-engine deal more likely.”

Microsoft continues to invest heavily in search, and appears to be readying a new look and a new brand for Live Search, “code-named” (read: float it out there and gauge the reaction) Kumo.com.  However it continues to lag far behind in search market share.  A deal with Yahoo! would help Microsoft gain share and credibility as it attempts to build a search and advertising base in order to fund search, and web ventures such as Windows Live, Outlook Live, Office Live, and web based versions of Office 14.