• D: All Things Digital, Tuesday, May 27, 2008 9:15 AM

You probably noticed that we didn't hear much from Bill Gates during Microsoft's three-month pursuit of Yahoo. Sources tell BoomTown's Kara Swisher this is because the Microsoft chairman never cared much for the deal, always preferring a partial transaction that would land the software giant Yahoo's search business. But Gates opted to leave the matter in the trusted hands of friend and colleague Steve Ballmer, the Microsoft CEO, who finally pulled the plug on the deal three weeks ago when it became clear that a proxy fight was the only means by which he could achieve a Microsoft-Yahoo union. Swisher said the collapse will have sat just fine with Gates, who's still very interested in Yahoo's search business.

But now the table have turned: shareholder unrest and the specter of a proxy fight by billionaire investor Carl Icahn have brought Yahoo back to the negotiating table, and Yahoo wants nothing less from Microsoft than a complete sale for more than $33 per share. Of course, Microsoft is now no longer interested in such a purchase-several execs have publicly stated as much-, so the matter has returned to a familiar stalemate.

"Yahoo is convinced they are a strategic imperative for Microsoft, although I think sometimes that their execs must be smoking something," a source tells Swisher. With Yahoo scrambling to nail down a deal that Microsoft looks increasingly unlikely to pursue, Google once again emerges from Microhoo's ashes in a favorable position, as the search giant may yet prove to be Yahoo's last resort.

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