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2/18/2010
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Microsoft-Yahoo Deal Gets Green Light

Companies say it's now just a matter of days before they implement their wide-ranging search alliance.

Antitrust regulators in the U.S. and Europe gave thumbs up to Microsoft's search alliance with Yahoo, paving the way for the companies to fully implement the agreement.

The U.S. Department of Justice and the European Commission both approved the deal without restrictions, Microsoft said Thursday. As a result, Microsoft and Yahoo said they will put many of the deal's features into practice within days.

"Although we are just at the beginning of this process, we have reached an exciting milestone," said Microsoft CEO Steve Ballmer, in a statement. "I believe that together, Microsoft and Yahoo will promote more choice, better value and greater innovation to our customers as well as to advertisers and publishers," said Ballmer.

The most notable part of the pact will see Yahoo effectively outsource search on its Web sites to Microsoft's Bing search engine. Still, Yahoo officials insisted their company isn't abandoning search for good and will continue to invest in the technology.

"This breakthrough alliance means Yahoo can focus even more on our innovative search experience," said Yahoo CEO Carol Bartz, in a statement.

"Yahoo gets to do what we do best: combine our science and technology with compelling content to build personally relevant online experiences to our users and customers," said Bartz.

Microsoft and Yahoo unveiled their wide ranging search alliance on July 29, 2009 following months of on-again, off-again negotiations. The pact calls for Microsoft's Bing technology to power queries on all of Yahoo's Web properties, while Yahoo assumes broad sales responsibilities for its own, and Microsoft's, Internet platforms.

Microsoft's AdCenter software will serve as a self-service search advertising tool for both companies.

The deal does not extend to Internet display advertising. Yahoo, meanwhile, will continue to "own" the overall user experience on its search pages, though Bing will carry out the actual queries.

Microsoft will compensate Yahoo for traffic from Yahoo's sites under a revenue sharing formula under which Yahoo will retain 88% of the search revenue generated on its pages for the first five years of the deal.

Yahoo has said it expects the arrangement to add $500 million to annual operating income and $275 million to cash flow while cutting capital expenses by $200 million.

Investors shrugged off the news, as shares of Microsoft and Yahoo were flat in early trading Thursday.

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