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For months, Yahoo and Microsoft have held on and off discussions about how to pool their search efforts together to create a more powerful counterweight to Google. The Times reported that the talks were continuing as recently as Tuesday. Now it appears that the talks have heated up again, suggesting that a deal could be closer at hand than ever.

A handful of top Microsoft executives are in Silicon Valley meeting with their Yahoo counterparts to try to iron out remaining wrinkles in a proposed partnership, according to people briefed on the talks who agreed to speak on condition of anonymity because the negotiations are confidential.

The executives include Yusuf Mehdi, senior vice president of Microsoft’s online audience business group, who has been heading up Microsoft’s massive marketing push behind Bing, the company’s new search engine. Other executives said to be there by one person briefed on the discussions include Satya Nadella, a senior vice president who leads engineering efforts for Microsoft’s online services group, and Qi Lu, the former Yahoo executive who is now president of Microsoft’s online services group, according to one person briefed on the discussions.

The latest round of discussions was first reported late Thursday in AllThingsD, a tech industry blog. Microsoft and Yahoo declined to comment. The exact terms of the proposed partnership remain in flux, one person said. The two sides have met many times and discussed many different scenarios. They include a version of a proposal under which Microsoft would take over Yahoo’s search advertising efforts, and the two companies could pool some of their display advertising, which the companies contemplated earlier this year. Yet one person cautioned that the discussions remain “wide ranging.”

While the new round of high-level talks suggest that a deal could finally be close, the people briefed on them said that it was difficult to predict how long it would take to resolve remaining differences. And of course, the two sides have been close to a deal many times before, and it is still possible that they will be unable to reach an agreement, they said.

(source: http://bits.blogs.nytimes.com/2009/07/17/yahoo-and-microsoft-closer-to-a-partnership/?ref=technology)