Yahoo, Google May Walk Away from Search Deal: Report - Page 2

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Yahoo spokesman Tracy Schmaler said discussions between the two companies are ongoing and they are working with regulators.

"We believe strongly that this agreement will strengthen Yahoo's competitive position in online advertising and will help to drive a more robust, higher quality Yahoo marketplace for our advertisers, publishers and users," Schmaler said in an e-mailed statement.

Google spokesman Adam Kovacevich said they continue to have "cooperative discussions" with the Justice Department.

"We are confident that the arrangement is beneficial to competition, but we are not going to discuss the details of the process," Kovacevich said in a statement.

Yahoo struck the search deal with Google as a way to fend off Microsoft Corp.'s unsolicited bid.

By collecting the revenue from placing Google ads alongside its search results, Yahoo's cash flow could grow by $250 million to $450 million in the first year of the deal, the companies had said in June.

The deal has since been mired in the regulatory process. In September, the Justice Department hired Sandy Litvack, its former antitrust chief and Walt Disney Co's former vice chairman, to consult on its probe of the search deal.

Separately, Yahoo is in advanced discussions with Time Warner Inc about buying the content and advertising operations of its AOL unit, sources have told Reuters.

Yahoo and AOL are presently conducting due diligence to see what a combined company would look like, one source said.

(Reported by Diane Bartz in Washington; Anupreeta Das and Jennifer Martinez in San Francisco; Edited by Bernard Orr)

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