MOUNTAIN VIEW, California: Accepting the inevitable – that the US government and advertisers alike oppose the mooted advertising alliance between the world's two major search portals – Google has withdrawn from further negotiations with Yahoo, claiming it wants to avoid a "protracted legal battle".

This could be terminal news for Yahoo ceo Jerry Yang who can now expect to face the concerted wrath of shareholders – especially the Icahn faction – over his earlier refusal of a takeover bid from Microsoft.

But there is a hefty hint of a U-turn by Yang, who on Wednesday told a conference in San Francisco: "To this day, I believe the best thing for Microsoft to do is to buy Yahoo."

Activist shareholder Carl Icahn has for months been agitating for exactly that. Said he yesterday: "A deal such as the one turned down this summer with Microsoft, if still available, where Microsoft guaranteed income from search, would be excellent.

He also told a reporter: "I never thought a short-term Google deal was that important to Yahoo."

Yahoo said it was "disappointed that Google has elected to withdraw from the agreement rather than defend it in court." But a Yahoo spokesman played down the importance of the deal to the portal's future, describing it as "incremental."

Data sourced from Wall Street Journal Online; additional content by WARC staff