The fire's been rekindled between Microsoft and Yahoo, according to Kara Swisher at All Things D, which says talks between the companies are "down to the short strokes," as quoted by one person "close" to the situation.

Microsoft made an unsolicited $47.5 billion bid for Yahoo in February 2008. The latter rejected it in three different instances over the course of that year.

In November, Steve Ballmer decided Microsoft was "done with all acquisition discussion with Yahoo" but remained "very open" to an online search collaboration.

Swisher writes that last week, top Microsoft executives — including SVP-Online Audience Business Group Yusuf Mehdi, search head Satya Nadella and digital head Qi Lu — flew to Silicon Valley from Redmond, WA to wrap up remaining issues.

While no specifics on those issues were divulged, terms of the new deal could stipulate that Microsoft pay Yahoo several billion dollars to take over search advertising, in addition to a payment guarantee. Yahoo may also be given the reins managing display advertising on Microsoft's behalf.

A deal may be finalized within the week.

In an analysis, Bill Tancer observed that such a deal may enable Yahoo and Microsoft to avail two completely different demographics to one another.

"Yahoo! [skews] towards the younger searcher, and MSN Search - older. Demographic distance between the two properties could be an important factor in understanding how well Yahoo! Search ad inventory would sell on MSN Search (now Bing)," Tancer wrote.

He added that their demographic fit "should yield more search advertising sales efficiencies."

Microsoft's Bing search engine launched in early June amidst an aggressive advertising campaign. For the month of June, interest in Bing gave Microsoft a small leap in search rankings, bringing the company up to 8.4% US search share, a rise of 0.4 percentage points.

Google continues to lead the pack with 65% of market share, followed by Yahoo with 19.6%.