Tech Rumor of the Day: Microsoft, Yahoo!

Yahoo!'s Carol Bartz's remarks lead one analyst to think a search-ad deal with Microsoft could happent soon.
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Carol Bartz,

Yahoo!'s

(YHOO)

tough-talking CEO, said just enough about negotiations with

Microsoft

(MSFT) - Get Report

over its search business recently to signal that a deal could be at hand soon.

In an interview with BoomTown blogger Kara Swisher on Wednesday, Bartz was asked about the current state of discussions for the potential search partnership. Bartz outlined some of the seemingly achievable objectives that need to be met.

"If there's boatloads of money, and the right technology, and there's the right information we'd have, sure," Bartz said.

Collins Stewart analyst Sandeep Aggarwal's takeaway was positive on the deal front.

"What Bartz said tells us two things," says Aggarwal. "She's interested in a deal with Microsoft, and she cares about the economics of the deal."

The hang-up, says Aggarwal, is price.

Aggarwal expects that to fulfill Bartz' requirement for "boatloads of money," Microsoft will provide a one-time upfront payment of $3 billion. He also expects Microsoft to chip in more of its take in search ad revenue. A critical part of a potential search partnership is how the companies divvy up the ad revenue. Aggarwal expects Microsoft and Yahoo! to form a standard revenue-sharing agreement that splits the proceeds between the two companies.

In exchange, Yahoo! would shift a big portion of its search operations to Microsoft's data centers helping to relieve costs. But Yahoo! would require Microsoft to share user search information, which is key to Yahoo!'s effort to better target display ads. Last month, Bartz said Yahoo! would try to fine-tune its online advertising approach by better matching display and banner ads to user interests.

Microsoft, a distant No. 3 in the search market, is a motivated partner in this discussion as it looks for a way to compete with

Google

(GOOG) - Get Report

. After a yearlong on-and-off-again Yahoo! takeover attempt, Microsoft still remains interested in some sort of deal.

Aggarwal, for one, expects a search deal to be reached within the next two months.