The ad deal is scuttled by Justice Department objections. Will Microsoft come calling again?

Google Inc. tossed floundering Internet rival Yahoo Inc. a life preserver four months ago when the two companies agreed to a search advertising deal. But with federal regulators ready to challenge the plan on antitrust grounds, Google abruptly cut the rope Wednesday, setting Yahoo adrift again.

 

And, just as earlier this year, there's a familiar shark circling Yahoo in the water: Microsoft Corp.

 

Yahoo has shrinking options for a rescue that would help the 15-year-old company remain independent, and Chief Executive Jerry Yang's job is in trouble, analysts say. But Yahoo's stock rose as much as 11% Wednesday on speculation that Microsoft would make another bid for its search business. Shares closed up 57 cents, or 4%, at $13.92.

 

"The loss of the Google deal is going to cause cascading problems for Yahoo," said Sanford C. Bernstein analyst Jeffrey Lindsay. "It's hard to see how Jerry Yang survives it."

 

The Sunnyvale, Calif., company's hopes of boosting its annual revenue by $800 million through the Google partnership were torpedoed by the objections of Justice Department antitrust officials, who asserted that the deal would erode competition in the online advertising market.