Microsoft-Yahoo Partnership?

REDMOND, Calif. -- Microsoft and Yahoo! are talking about a potential search and advertising join venture.

According to various sources, both companies are in "early discussions" and new Yahoo! CEO Carol Bartz met with Microsoft's Steve Ballmer.

All Things Digital reports the two firms are seeking to team up and take on Google, while Microsoft's pursuit of acquiring Yahoo! has now been tabled.

In February, Ballmer reportedly bid $31 a share for Yahoo!, but then-CEO Jerry Yang turned the offer and Ballmer upped it to $33 a share ($47.5 billion), which was also rejected. Ballmer also bid on Yahoo's search business, reports UK news site, The Register.

Under Yang, Yahoo! attempted a search ad agreement with Google, which fell through when the U.S. Department of Justice threatened legal action over such a move.

Sources told All Things Digital the new agreement might find Yahoo overseeing Microsoft's display business with MS running the search business for both departments.

Meanwhile, Yahoo! recently came back to life with a 10 percent rise in first-result-page advertisers in the first quarter of the year, according to AdGooroo.