Yahoo chief executive Carol Bartz was appointed in January 2009 with the task of turning the troubled search company around.
Her predecessor, Jerry Yang, had overseen Yahoo's decline in search market share against Google, and witnessed swinging share prices caused by a failed Microsoft acquisition attempt.
When Bartz came in, the big question was whether she had the deal-making capabilities to secure a much needed sale of the search business to Microsoft, or at least some kind of partnership that would bring Yahoo significant revenue.
Reports had been circulating since May 2007 that Microsoft was about to make a bid for Yahoo and, when the $44.6bn (£30bn) offer arrived in January, the industry believed that the deal would appeal to Yahoo's stakeholders and go ahead. Yahoo rejected the offer, however, citing a search deal with Google as one of the main reasons.
When the Google search advertising deal fell through, Yahoo's share price collapsed and Yang stood down as chief executive. Rumours were rife in December 2008 that Microsoft would make another offer.
The first indicator that an outright acquisition was certainly on the cards was when Microsoft chief executive Steve Ballmer emphatically denied any chance of new acquisition talks at the Committee for Economic Development in Washington.
"We made an offer, we made another offer, it was clear Yahoo did not want to sell the business to us, and we moved on," he said at the time.
But then a report in The Sunday Times claimed to have knowledge of a new deal that differed substantially from previous ones.
Rather than buying Yahoo's search business upfront, Microsoft would obtain a 10-year operating agreement to manage Yahoo's search division, while Yahoo would continue to run other parts of its business.
While all the details in the report have not materialised, the essence of what has now been announced by the two firms was captured by the report.
In July 2009, Microsoft and Yahoo announced a 10-year search partnership that Yahoo estimated would increase its revenue by approximately $500m (£305m) per annum.
The companies aim to have the deal closed by early 2010, following regulatory approval. The full implementation of the partnership will then occur in the following 24 months.
Under the terms agreed, Microsoft's Bing will power Yahoo search, while Yahoo will use its solid relationship with advertisers to become the "salesforce" for both companies' search advertisers.
The pair claim that the deal will accelerate innovation in search, and make Bing-powered search more personally relevant to users because of its increased advertising strength. Microsoft said it will differentiate its search content from Google's by pulling in content not found elsewhere.
There have since been rumours that Microsoft plans to sign a deal with News Corporation that will see certain news sites removed from Google's index and ranked exclusively with Bing.
And Bing has been gaining ground on Google in recent months, according to market research firm comScore, although Yahoo search share has been decreasing.
Yet Bartz has made it clear that Yahoo is no longer driven to compete as a standalone search company, and has said that Microsoft's expertise will let Yahoo concentrate its growth in the priority areas of display advertising capabilities and mobile experiences.
Yahoo aims to become the main online content portal for web users. The strategy is to increase the number of Yahoo pages to create more opportunities for display ads.
The main difficulty now will be for Microsoft to overcome an intellectual property lawsuit instigated by a US company called Bing! Information Design. The design firm is prosecuting the Redmond giant for copying its name, and argues that it has suffered a dent in sales during the past six months.
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