Yahoo! says no deal to Microsoft

Microsoft wants to buy, but Yahoo isn't selling. That's what Terry Semel, chairman and chief executive of Yahoo told Gates when he offered to buy a stake in Yahoo's search business, according to the Financial Times. Semel also told the Times there were never any discussions with Gates about acquiring Yahoo, as had been widely reported last week.

Gates does seem to be on the partnership bandwagon and may have thought he had found a pal in Yahoo. MSN had been using Yahoo search advertising and the partnership was running smoothly.  But, once the talks about Gates buying a stake in Yahoo fell through,  Microsoft quickly dropped using Yahoo ads. The friendship obviously soured quickly. Gates let Semel know he doesn't like taking no for an answer.

Semel is defiant though and told an audience at the Newhouse Communications School of Syracuse University, "I will not sell a piece of search – it is like selling your right arm while keeping your left; it does not make any sense."  He's right and Bill Gates will just have to deal with it.

That does make the three-way search advertising wars even more personal. While the Google/Microsoft battles have been widely discussed, I don't think anyone realized how much tension was building between Yahoo and Microsoft until Microsoft abruptly dropped Yahoo and announced the launch of AdCenter last week. 

The Financial Times also reported that Semel told Gates, "My impartial advice to Microsoft is that you have no chance. The search business has been formed." 

Now dem's fightin' words and probably just made Gates madder. Knowing that, it's no surprise to me that the partnership ended so abruptly.