MAY 6 2008 06:59h
Google Inc and Yahoo Inc are still hammering out the intricacies of a potential advertising and search deal.
The two sides are also sharing their plans for a potential deal with antitrust regulators, the source said.
Yahoo and Google are "vetting any potential agreement with antitrust regulators," said the source, who was not authorized to speak on the record about the confidential discussions.
Other sources previously told Reuters that a deal between Yahoo and Google, in which Yahoo carries advertising from Google alongside its search results, could be announced this week.
The source close to Google did not say when an agreement, if any, would be announced.
Google and Yahoo raised antitrust concerns, including questioning from the U.S. Department of Justice, after Yahoo announced in early April that it was conducting a two-week test in which 3 percent of Yahoo's U.S. searches would display ads using Google's AdSense system.
Google is the top search engine, and a tie-up with Yahoo, the No. 2, would give the two companies more than 80 percent of the search market, according to online ratings company Hitwise.
The two companies have said they are cooperating fully with antitrust authorities.
The companies are working out deal terms that would not prevent Yahoo from pursuing other partnerships, including with Microsoft Corp, if any deal is struck, the source said.
On Saturday, Microsoft withdrew its sweetened, $47.5 billion offer for Yahoo after the two sides failed to agree on a price.
In his letter to Yahoo CEO Jerry Yang, Microsoft CEO Steve Ballmer cited Yahoo's pursuit of an ad deal with Google as one reason the software titan was walking away rather than mounting a hostile effort.
On Nasdaq, Yahoo shares fell $4.30 to close at $24.37, Google rose $13.61 to $594.90, and Microsoft edged down 16 cents to $29.08.