Under one scenario, Microsoft would sell Yahoos search ads while Yahoo manages Microsofts display ads.

Its the first significant move toward a new deal since Yahoo walked away from Microsofts unsolicited buyout offer last year.

Both companies are having a hard time catching up to search leader Google Inc.

Microsofts Steve Ballmer says he has only talked once with Yahoos new chief, Carol Bartz, since she took over in January.

Neither company would comment on the meeting, which was described as preliminary and informal by The New York Times and The Wall Street Journals All Things Digital blog.

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