Yahoo and Microsoft reached agreement Wednesday on a long-awaited Web search partnership that would unite the two companies against market leader Google. Under the no-cash 10-year deal, Yahoo will use Microsoft's new Bing search engine on its own sites, while Yahoo will act as the exclusive global sales force for the companies' premium search advertisers. Yahoo, which last year turned down a 47.5-billion-dollar takeover bid from Microsoft, said it stood to gain about $500 million in annual operating income and $200 million in capital expenditure savings through the agreement with the software giant. The Sunnyvale, California, company also estimated the deal – which the companies hope to close next year – would provide it with a 275-million-dollar benefit to annual operating cash flow. The agreement will be subject to review by US regulatory authorities, the companies said. It is restricted to Internet search and related advertising revenue, while the pair would retain full autonomy on other properties and products such as email, instant messaging and display advertising. It could be a while before Microsoft and Yahoo can begin working together because the partnership is likely to draw federal antitrust scrutiny to ensure the combination won't have an adverse effect on competition in the online ad market. Yahoo chief executive Carol Bartz described the deal as “the foundation for a new era of Internet innovation and development.” The partnership, Microsoft said, “gives us the scale and resources to create the future of search.” Microsoft is doubling down on Internet search at the same time Google is attacking Microsoft's bread-and-butter business of making software for personal computers. Google is working on a free operating system, called Chrome OS, for inexpensive personal computers in a move that could threaten Microsoft's ubiquitous Windows franchise.
