MOUNTAIN VIEW, Ca. – Microsoft Corp. abandoned its pursuit of Yahoo Inc., opening the way for Yahoo to complete a search-advertising pact with rival Google Inc. that pits the industry’s two biggest forces against Microsoft.

Microsoft told Yahoo that it was no longer interested in pursuing a takeover, even at the $33 a share it offered for the Internet company last month, The Wall Street Journal reported. That price would have valued Yahoo at nearly $50 billion.

Microsoft also unsuccessfully floated an alternative proposal to acquire Yahoo’s search business. It isn’t clear how Microsoft valued the business, but as part of that deal, Microsoft said it was prepared to acquire an additional 16 percent of Yahoo for $35 a share, or about $7.73 billion, according to people familiar with the situation.

Yahoo said Thursday that under the new Google pact, it will display some ads sold by its rival in a deal Yahoo estimated would generate $800 million in annual revenue through improved monetization of certain types of searches. Both companies said they were looking at ways to expand the limited partnership, possibly into display advertising.

Yahoo will control how Google’s ads are displayed alongside its own advertising. The pact is sure to face regulatory scrutiny. The companies agreed to delay its implementation for as many as three and a half months to allow regulatory review. In an interview, Yahoo President Susan Decker described the deal as “a bridge” that will help the company build up a converged display and search business.

The agreement seemed to leave room for Yahoo to pursue another deal, including a sale to Microsoft. Yahoo said either party can end the agreement in the event of a change in control. If that happens in the next 24 months, Yahoo would have to pay a termination fee of $250 million, minus some of the revenue Google had earned through the deal.

The latest moves portend a period of deep uncertainty for the Internet sector, as the biggest players look for strategic footing against Google and smaller upstarts. Yahoo’s future also remains unclear. It must prove to impatient investors and employees that its independent strategy can work while competition heats up.

In retrospect, Microsoft’s tactics appear to have badly backfired. Instead of winning Yahoo’s huge audience and online search capabilities, Microsoft has driven its quarry into the arms of its archenemy — Google.

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