Yahoo! held a board meeting yesterday to review how far its discussions with Time Warner about a white knight rescue were progressing, although any agreement is still thought to be a fortnight away.

The search engine, battling to stave off a hostile $39 billion (£19.7 billion) bid from Microsoft, is still understood to have some way to go before it knows whether it can announce that it has agreed a deal in which Time Warner will inject AOL into an enlarged Yahoo!

Yahoo! is also hoping that its newly announced deal with Google, in which Google will provide it with search engine advertising, could materially boost the valuation of Yahoo! Google is only working with Yahoo! on a trial but analysts believe that a tie-up, were it approved by regulators, could boost Yahoo!'s cashflows by $1 billion a year.

Debates about valuations helped create an impasse in similar discussions between Yahoo! and News Corp, where Yahoo was not willing to accept that MySpace, the News Corp social network that would have been injected into Yahoo!, was worth as much as $15 billion. Yahoo! is offering to accept AOL in return for a stake of about 20 per cent, valuing AOL at around $10 billion. Yahoo! has rejected Microsoft's hostile bid but its share price remains just below the offer level at $28.35, down 24 cents.

However, its initial in-principle opposition to the software giant has softened to the point where Yahoo! is justifying its rejection solely on the grounds of price.

Google, meanwhile, confirmed that it has hired Frank Quattrone, the one-time Credit Suisse technology banker, who was cleared of obstructing justice last year, after a long and unsuccessful federal prosecution dating back to his role in a series of flotations during the dot-com boom.

Google is using his newly created firm Qatalyst to advise it on the Yahoo! situation, although the number one search engine faces regulatory barriers if it tries to get directly involved in the bid battle.

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