Microsoft and Yahoo close the deal

International "Real Choice. Better Value. More Innovation" is the tag line of the new partnership.

A partnership between Microsoft, the world's largest softwate company, and Yahoo, one of the internet's biggest brands, was announced Wednesday in a move aimed at challenging the dominance of the Google search engine. "Real Choice. Better Value. More Innovation" is the tag line of the new partnership. Although neither company directly mentioned Google in statements announcing the launch, the presence of the Californian search giant loomed over the announcement.

"This deal will combine Yahoo and Microsoft search marketplaces, so that advertisers no longer have to rely on one company that dominates more than 70 per cent of all search," the two companies said in a joint announcement. Steve Ballmer, the Microsoft, the chief executive, was equally explicit in his explanation of the deal. "Through this agreement with Yahoo, we will create more innovation in search, better value for advertisers, and real consumer choice in a market currently dominated by a single company," he said.

The agreement will unite the search and online advertising efforts of each company, with Microsoft taking over the technical development of the search engine and Yahoo becoming responsible for advertising sales. For the ten-year duration of the deal, search services provided on Yahoo internet properties will be powered by Microsoft's new Bing search engine. Yahoo will be the exclusive sales agent for search-related advertising on each company's websites.

The deal will require regulatory approval, with the two companies saying they expect full implementation of the agreement within two years. Microsoft said the partnership will help it save US$200 million (Dh734.6m) per year and could boost operating profits by up to US$500 million. Yahoo said the agreement could provide it with up to $275m of additional cash flow each year. In 2008, Microsoft attempted to acquire a controlling stake in Yahoo, valuing the company at $44.6 billion. The offer was rejected by Yahoo's board, who said it "substantially undvervalues" the company. [e-mail]