San Francisco - Microsoft and Yahoo are still actively pursuing a deal, but current discussions involve the participation of partners like News Corp and Time Warner that could lead to the break-up of Yahoo, the Wall Street Journal reported Wednesday.

The report said that Microsoft was still not interested in resurrecting its 47.5-billion-dollar bid for the entire company. But it was interested in buying Yahoo's search business and then parceling out the other parts of the company with partners.

The report came as US anti-trust regulators opened an investigation into Yahoo's search advertising partnership with Google. According to the Washington Post, the Justice Department is examining if the 800-million-dollar-a-year deal between the two dominant advertising companies on the internet restricts competition in the market.

Under the deal, Yahoo will run some Google ads alongside its search results. Because Google's technology is better at matching relevant ads to those search results, Yahoo predicts the deal could yield an extra 250 million dollars to 450 million dollars in its first year.

A formal antitrust probe is not expected since the two companies are not merging. But the launch of the investigation does indicate concern that the deal will concentrate too much power in Google's hands, the report said.

The deal, which was announced last month after a brief trial run, was seen as a Yahoo strategy to ward off Microsoft's advances and increase shareholder value.

Yahoo's board is currently facing a revolt by shareholders led by billionaire Carl Icahn who claim that the company botched negotiations with Microsoft.

Microsoft's 33-dollar-per share offer represented a premium of over 60 per cent on the Yahoo's share price before the bid was made. Yahoo's stock was trading at 21.50 dollars in morning trading Wednesday, up over 8 per cent on the reports of a deal revival with Microsoft. (dpa)