• D: All Things Digital, Tuesday, May 5, 2009 11:45 AM

A Microsoft-Yahoo partnership, once described once described as being in "hot and heavy" talks by Kara Swisher, is now "closer than it has even been," according to one of her sources, who adds, "we're finally talking about the how rather than the if." Said another: "It's meaningful. The fact that there is even progress and engagement, after so many failed attempts between us, says a lot." Others said a deal could be struck in the next few weeks.

How would such a deal look? The latest thinking, according to Swisher, is that Yahoo would take over both the search and display advertising sales and Microsoft would run the technology for both platforms from behind the scenes. It's not yet clear if any assets would be traded.

Even so, whether or not Yahoo and Microsoft can come to a partnership agreement is still a big if, Swisher says, although Microsoft execs report that new Yahoo CEO Carol Bartz is much more straightforward to work with than former CEO Jerry Yang. Yahoo execs also report that Microsoft appears much more willing to make a deal happen and is more flexible on terms than it was in previous negotiations.

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