WSJ reports that Microsoft and Yahoo are close to sealing a a search partnership to compete against Google.

Microsoft, Yahoo Near Search Deal

By JESSICA E. VASCELLARO and NICK WINGFIELD

Yahoo Inc. and Microsoft Corp. are moving toward sealing a search partnership, say people familiar with the matter -- a deal that ends a protracted dance and unites the pair against Google Inc.

Microsoft, which had made a failed $47.5 billion takeover bid for Yahoo, appears to have finally won a piece of what it wanted from the Internet player -- the volumes of search queries that run through Yahoo's engine.

In exchange, Yahoo is getting an opportunity to expand its own position in the market by remaining a force in search-advertising sales.

The agreement, which could be reached as soon as Wednesday but could be delayed, involves Yahoo agreeing to use Microsoft's Bing search engine on its own sites, these people say.

In a shift from earlier discussions, Yahoo would handle selling the text ads that appear next to the search results for its sites and some Microsoft sites, say these people.

The financial arrangement and terms under consideration couldn't be learned.

I wonder if the Yahoo folks who joined Microsoft’s data center group were used to help instill confidence at Yahoo in Microsoft’s data center infrastructure.