Yahoo rallies on renewed hopes for Microsoft deal

NEW YORK: Yahoo Inc. shares rose 4 percent on Friday amid speculation it will team up with Microsoft Corp. in an online search advertising partnership aimed at mounting a more serious challenge to Google Inc.

The Sunnyvale, California-based company is also getting a slight boost after Google released its second-quarter earnings late Thursday.

Google executives say larger advertisers have returned to the Internet after being absent earlier in the year, raising hopes that Yahoo's second-quarter results might not be quite as dreary as some investors feared. Yahoo reports on Tuesday.

Yahoo and Microsoft have been meeting in the Silicon Valley this week and could sign a deal as early as next week. That's according to AllThingsD, a technology blog that cited unnamed people at both companies.

Yahoo and Microsoft declined to comment.