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Yahoo-Microsoft partial deal not imminent

The Internet company is exploring the antitrust ramifications of a partial search sale or partnership with Redmond--but a deal is not close at hand, sources say.

Yahoo has virtually all the antitrust information it needs to know to make a decision on whether to proceed with a Google ad outsourcing deal that would pass muster with antitrust regulators, but it has only begun to explore that issue for a scaled-down Microsoft agreement, according to sources.

As a result, any deal that calls for Yahoo to turn over its search business to Microsoft is not on the immediate horizon, noted one source familiar with the talks.

Two weeks ago, Yahoo began to internally explore the antitrust ramifications of a scaled-back Microsoft deal, leaving the Internet search pioneer with a lot of ground to cover before making any future decisions on a partial transaction with Microsoft, said another source.

However, though there may be a lot of antitrust ground to cover, the details may not be that taxing. Yahoo may have the luxury of pulling from some earlier work done in gathering antitrust information when Microsoft's unsolicited full buyout bid was still on the table.

On February 1, Microsoft announced an . Shortly after that announcement, the Internet company began to review whether antitrust ramifications existed and to what degree.

"A lot of work was done then," according to the source. That said, however, the source noted it was still unclear whether antitrust issues would stand in the way of a full acquisition of Yahoo.

Microsoft withdrew its buyout offer in mid-May and then returned three weeks ago with an announcement that it was restarting talks with Yahoo--but discussions would center on a partial transaction rather than a full purchase of the entire company.

In other words, some of the antitrust work that Yahoo performed earlier is salvageable, said sources familiar with the talks.

That sentiment was shared by Peter Halle, an antitrust attorney with Morgan Lewis & Bockius. "It would be the same if you were selling all of General Motors, or just the Cadillac division of General Motors. You still have to ask the same questions, by and large," Halle said.

Those questions, for example, would include: what is being acquired, what markets do they compete in, and whether competition will be substantially lessened as a result of the transaction.

And in the case of a partial acquisition, another layer to be considered is whether the asset that is sold will weaken competition in some other unrelated market. For example, if General Motors sold off its division that made engines for its automobiles, GM would then be forced to buy engines. That transaction could affect an unrelated market, Halle noted.

But while Yahoo and Microsoft may save time by applying some of the antitrust internal review materials they considered in a full buyout to a partial deal, it won't necessarily lead to a speedier review process by federal regulators.

Representatives for both Yahoo and Microsoft declined to comment on talks between the two companies and their antitrust review process.