Tech Central: Jerry Yang confronts the difficult questions

Jerry Yang, Yahoo!’s chief executive, has admitted that he is open to a new deal with Microsoft after the web portal’s advertising partnership with Google fell apart yesterday.

Mr Yang, speaking after Google backed out of the deal, made a U-turn on his previous sentiment toward a takeover by Microsoft, when he fiercely resisted an unsolicited takeover bid in May.

Mr Yang told the Web 2.0 conference in San Francisco: "To this day, I would say that the best thing for Microsoft to do would be to buy Yahoo!. Did we want to do the deal? Yes.

"People who know me know I don't have an ego about remaining independent,” he added. "We remain open to everything but it has to make sense."

Google walked away from a revenue-sharing deal with the internet group to avert a "protracted legal battle" with US regulators, prompting speculation that Microsoft could make another attempt to buy Yahoo!.

Steve Ballmer, Microsoft’s chief executive, said last month that the business reasons for acquiring Yahoo! still made sense, but the company denied that Mr Ballmer’s comments meant that Microsoft was still actively pursuing a deal.

“Microsoft has no interest in acquiring Yahoo!”, a spokesman said at the time. “There are no discussions between the companies."

Most industry analysts believe Microsoft will make another run at Yahoo!, particularly now that the company can be bought at a fraction of the May offer.

Instead of buying Yahoo! in its entirety, Microsoft may just acquire Yahoo!'s search engine, which ranks a distant second in usage behind Google's. Microsoft attempted to buy Yahoo!'s search engine shortly before the Google partnership was reached.

Yahoo! struck the deal, which would have allowed Google’s search-based advertising to run on Yahoo!’s network in return for a share of the revenue, to fend off Microsoft's unsolicited takeover bid and provide a much-needed revenue boost for the struggling company.

It was estimated that Yahoo! could have made up to $800 million a year, but advertisers feared the joint venture would lead to a rise in prices for search adverts.

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