Photo by DBegley Microsoft CEO, Steve Ballmer image:40245:3::0

After takeover talks between Microsoft and Yahoo fell apart, Microsoft says it's now considering a deal that would not involve a full buyout of Yahoo. The talks continue as Microsoft eagerly looks to find a way to expand online services and advertising.

Digital Journal -- Microsoft made a bid to buy Yahoo in early February (see previous coverage) and since its multi billion-dollar bid was shot down by Yahoo's board, Microsoft has been desperate to find grounds on which it can work with the company. In a statement issued to the media, Microsoft now says it's looking to grow its online presence and ad network so it is considering other options with Yahoo.

“In light of developments since the withdrawal of the Microsoft proposal to acquire Yahoo Inc., Microsoft announced that it is continuing to explore and pursue its alternatives to improve and expand its online services and advertising business," the company's statement reads.

The Microsoft-Yahoo talks have been a very public back-and-forth dispute, as Yahoo says Microsoft's bid was not high enough; Microsoft argues it was; Google has weighed in on its concerns if a merger were to happen; and billionaire Carl Icahn went so far as to threaten a takeover of Yahoo's board to force a merger.

But with talks going stale, Microsoft says it's now "...considering and has raised with Yahoo an alternative that would involve a transaction with Yahoo but not an acquisition of all of Yahoo. Microsoft is not proposing to make a new bid to acquire all of Yahoo at this time, but reserves the right to reconsider that alternative depending on future developments and discussions that may take place with Yahoo or discussions with shareholders of Yahoo or Microsoft or with other third parties."

As a cautionary note to investors, Microsoft ends its statement by saying, "There of course can be no assurance that any transaction will result from these discussions."

Yahoo has responded to Microsoft saying it will consider alternatives.

Shortly after Microsoft issued its statement, Yahoo issued its own statement saying, "Yahoo has confirmed with Microsoft that it is not interested in pursuing an acquisition of all of Yahoo at this time. Yahoo and its Board of Directors continue to consider a number of value maximizing strategic alternatives for Yahoo, and we remain open to pursuing any transaction which is in the best interest of our stockholders. Yahoo's Board of Directors will evaluate each of our alternatives, including any Microsoft proposal, consistent with its fiduciary duties, with a focus on maximizing stockholder value."

Yahoo has also been mulling a possible deal with Google after the two firms joined together to test an advertising partnership.