Terry Semel, chairman and chief executive of Yahoo, said yesterday he had turned down an offer from Microsoft to buy a stake in Yahoo's search business and that broader discussions about Bill Gates' software group acquiring the company had not taken place. The comments to media executives reflect the discussions internet companies are having about alliances as they jostle for position in the lucrative search business dominated by Google.

Mr Semel said he had talked to Microsoft about continuing their partnership under which Microsoft's MSN internet arm has used Yahoo for search advertising. MSN has decided to end this and plans a rival advertising service to Google and Yahoo.