Yahoo (NASDAQ: YHOO) confirmed yesterday that it had been approached by Microsoft (NASDAQ: MSFT) about a possible tie-up between the two companies as an alternative to an acquisition.

Earlier in the day, Microsoft announced that it was pursuing some form of alliance with Yahoo as a way to expand its online advertising revenue, but it hinted that it a buyout could still be in the cards, "depending on future developments and discussion."

Microsoft said that its renewed interest in Yahoo came "in light of developments" that had arisen since talks broke down between the companies and it took its bid off the table two weeks ago.

The major development, of course, is the proxy war that activist investor Carl Icahn threatened last week as he nominated a slate of directors to replace Yahoo's current board and force the company into a sale to Microsoft.

Analysts were mixed in their views on how the latest exchange between the two companies would affect Icahn's proxy contest, which may come to a head during the company's annual shareholders meeting July 3.

In a research note, analysts from Jefferies & Company suggested that the two companies' discussion about a limited ad deal diminishes the possibility of an outright sale.

Conversely, a team of analysts from UBS believes that an ad alliance between the two companies could lay the groundwork for an eventual merger.

"While this alternative would not involve acquiring all of Yahoo, the door was left open for such a deal to take place at a later date," they wrote. "A near-term deal could act as an intermediate step that would go a long way toward testing the waters."

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The major question, of course, is what form the partnership would take. Microsoft pitched the acquisition as a way to narrow the gap between Google and its competitors in search advertising. In that spirit, some form of deal with Microsoft regarding search advertising seems likely, the analysts noted.

Yahoo could outsource a portion of its search advertising to Microsoft, similar to the trial program it conducted with Google. The UBS analysts said they would be curious about how the economics between the two outsourcing deals would compare.

Yahoo and Google have not announced a partnership beyond the three-week trial, which they said was a success. Microsoft said a deal between Yahoo and Google had made Yahoo less attractive as an acquisition prospect, so it remains unclear whether it would accept a scenario where Yahoo outsourced a portion of its search ads to both Microsoft and its chief rival.

An alternative would have the two companies team up on display advertising, an area where the Web companies compete on a more level playing field.

If Yahoo and Microsoft pooled their networks, they would create the largest repository of display inventory on the Web. Both companies' sales forces could cross-sell ads on the two networks, creating a "must-buy ad platform," according to Jefferies.

For Icahn, who charged that Yahoo's board had failed to act on behalf of the shareholders, it remains unclear whether he would be satisfied with a limited partnership with Microsoft. Icahn could not be reached for comment.

The main problem Icahn will have in his proxy battle is convincing investors that Microsoft is willing to come back to the table," said Richard Rafferty, a corporate and securities attorney and partner with the Texas-based law firm of Strasburger and Price.

Before electing a dissident slate on the promise that they would sell to Microsoft, investors would look for some indication that Microsoft is still even interested in the acquisition.

But Microsoft would be unlikely to explicitly state that it is willing to reenter acquisition talks with the new board, Rafferty told InternetNews.com.

"I think you'll see them talking through the press," he explained. "You might see them say something like, 'We would be willing to reconsider opportunities should they arise,'" to show that they're still interested in a deal.

The language of the statement Microsoft issued on Sunday seems to bear out that prediction: "Microsoft is not proposing to make a new bid to acquire all of Yahoo at this time, but reserves the right to reconsider that alternative depending on future developments and discussions that may take place with Yahoo or discussions with shareholders of Yahoo or Microsoft or with other third parties."