The chief executives of Microsoft and Yahoo met last week to discuss potential partnerships between the companies' Internet search and advertising operations, the technology blog All Things Digital reported on Friday.
Wide-ranging talks have taken place between executives at the companies, the blog reported, including discussion of the potential for Microsoft to handle Yahoo's search advertising business, and for Yahoo to combine and run the two companies' display advertising business.
Microsoft and Yahoo declined to comment on the report.
Expectation that the two technology giants would enter negotiations over Yahoo's search business has been rising since Yahoo's new CEO, Carol Bartz, took the reins in January.
She succeeded Yahoo co-founder Jerry Yang, who beat back Microsoft's effort to buy all of Yahoo last year for $47.5 billion, which soured relationships between the two companies.
Microsoft wanted to buy Yahoo chiefly to combat Google's dominance in the Internet search arena, and CEO Steve Ballmer has made it clear he would still like to do some sort of deal in that area.
"Unless I'm fooling myself, over time I would expect there's a good opportunity for a deal," Ballmer told a media conference in New York last month.