They are still fighting

SOFTWARE giant Microsoft has proposed a new deal to internet search engine Yahoo, which earlier this month drove away its $47.5 billion (£24.27 billion) takeover offer.

While it has not ruled out another tilt at full acquisition, Microsoft said the new deal did not involve buying all of Yahoo "at this time".

The proposal being discussed is understood to involve Yahoo carrying search advertisements from Microsoft.

That could scupper talks between Yahoo and arch-rival Google for a similar partnership, which began as Yahoo chief Jerry Yang sought to fend off Microsoft. Details of those talks are sketchy but they are thought to be aimed at boosting each other's share of the $41 billion web search and advertising market

Billionaire investor Carl Icahn last week pressured Yahoo to revive talks with Microsoft, threatening an assault on the company's board to force its hand.