As Microsoft enjoying relative success with the recent launch of its Bing Web site. The possible alliance itself is somewhat surprising. Top Microsoft executives are currently in Silicon Valley ironing out the short strokes, which apparently are related to deployment of technology. Neither side is commenting on the potential agreement, as they have been down this and similar roads together in the past.

Microsoft and Yahoo are in the final round of talks aimed at negotiating a deal that will include Microsoft paying several billion dollars up front to take over its search advertising business and guarantee certain payments back to Yahoo.

Although confident in Bing and the popularity it has been gaining since going live, Microsoft still is clearly far behind search titan Google (as is Yahoo). This proposed deal is not a complete Microsoft takeover as was initially being discussed earlier this year, but both companies can gain some ground in the battle by becoming allies.

Sources at both companies said that if everything works out, an announcement could be made within a week. It is probably a matter of time before they finally followed through negotiations to the end.