Yahoo! gave hope to shareholders expecting a new deal with Microsoft yesterday after the president of the search engine said: “There are many ways that a combination could be very beneficial.”

Susan Decker said in New York that talks between Yahoo! and Microsoft were “ongoing and engaged”.

At the end of January, Microsoft approached Yahoo! and offered to buy the company for $31 a share in cash and paper. In May, Microsoft raised its offer to $33 a share, valuing Yahoo! at $47.5 billion, (£24.3 billion) but was again rebuffed. The companies are believed to be discussing Microsoft taking a minority passive stake.

Yahoo! has announced two advertising deals, with Wal-Mart and CBS. A spokesman refused to divulge their value but they will help Jerry Yang, its co-founder and chief executive, to convince shareholders that he was right to have rejected a $33 a share offer from Microsoft. Yesterday, the shares rose 3 per cent to $26.86.

Mr Yang is under significant pressure to complete a deal with Microsoft before August 1, when the internet group holds its annual meeting.

Carl Icahn, the billionaire investor, has already taken a 4 per cent stake and is seeking regulatory approval to increase his holding to almost 10 per cent. Yesterday Mr Icahn reiterated his pledge to try to oust all nine directors from the Yahoo! board.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive