TIMELINE: Microsoft's pursuit of Yahoo

(Reuters) - Microsoft Corp said on Sunday it is in contact with Yahoo Inc about an alternative deal that would not involve a full acquisition.

Such a move could save Yahoo from fighting a proxy battle with financier Carl Icahn.

Following is a timeline of key events in Microsoft's pursuit of Yahoo, stretching back more than two years, when Yahoo's financial results began weakening and private talks started in which Microsoft sought to merge with the web pioneer.

Early 2006 - Yahoo begins to report a string of disappointing quarterly results that stretches over the next two years, reflecting competitive missteps by the company, market share gains by rival Google Inc, changes in the online advertising landscape and weakening spending in some ad segments.

Late 2006/early 2007 - Microsoft and Yahoo discuss various partnerships, including a merger.

2007

February - Yahoo, under the leadership of previous Chief Executive Terry Semel, tells Microsoft it is not the right time to discuss a takeover, as the Yahoo board sees great potential from new advertising technology and internal changes.

June 12 - A strong minority of Yahoo shareholders challenges Yahoo's direction, as CEO Semel comes under fire. Nearly a third of votes cast at the company's annual shareholder meeting oppose some of Yahoo's directors.

June 18 - Yahoo co-founder Jerry Yang takes over as chief executive as Semel steps aside. Semel remains Yahoo chairman.

2008

January 31 - Microsoft CEO Steve Ballmer makes a $44.6 billion, $31-per-share cash-and-stock takeover offer to Yahoo's board. Semel resigns as chairman and is replaced by Roy Bostock.

February 1 - Microsoft makes the offer public. Its shares fall 6.6 percent to $30.45; Yahoo shares rise 48 percent to $28.38.

February 11 - Yahoo rejects the Microsoft offer as too low.

February 13 - MySpace owner News Corp and Yahoo discuss a tie-up, according to a source.

March 18 - Yahoo gives financial forecasts for the next two years, in an effort to prove it is worth more than Microsoft bid.

March 28 - One of seven face-to-face meetings takes place between the "senior-most" executives of Microsoft and Yahoo to discuss the bid. Yahoo asks how Microsoft would handle regulatory issues, including antitrust concerns, tied to a merger.

April 4 - People familiar with the matter say Microsoft is evaluating its bid for Yahoo because the Internet company may have lost value since Microsoft first made its offer.

April 5 - Microsoft sets a three-week deadline for Yahoo to negotiate and reach a deal or face a proxy fight and a possible cut to the bid.

April 7 - Yahoo again rejects Microsoft and says it is open to a higher price.

April 9 - Yahoo says it will test Google search ads on its site, which could be more lucrative than selling its own search ads. Sources say Yahoo and Time Warner Inc are in parallel talks to join Time Warner's AOL and Yahoo.

April 15 - At another meeting between Yahoo and Microsoft executives and their financial advisers, Yahoo asks about Microsoft's integration plans and Yahoo raises a list of "key non-price deal terms" it believes are critical.

April 26 - Microsoft's deadline to Yahoo passes.

April 30 - Ballmer flies to California for talks with Yahoo CEO Yang.

May 3 - Yang meets Ballmer in Seattle. Microsoft raises its offer to $33 per share, or $47.5 billion. That is about $5 billion over the value of the previous offer at the time. Yahoo wants $37 per share, or about $5 billion more. Late in the day, Ballmer calls off the talks.

May 15 - Carl Icahn proposes a 10-member dissident board slate for election at Yahoo's annual shareholder meeting in July. Icahn says he now holds a 4.3 percent stake in Yahoo, including 9.9 million shares and 49 million call options. Yahoo Chairman Bostock replies to Icahn that "none of the alternatives we are considering would preclude us from entering into a transaction with Microsoft or any other party."

May 18 - Microsoft says it has raised with Yahoo an "alternative" deal that would not involve the software maker buying all of the web company but says it could reconsider pursuing a full acquisition.

July 3 - Yahoo's annual meeting is planned for July 3.

Sources: Letters between Microsoft, Yahoo and Icahn; Reuters stories.

(Compiled by Eric Auchard and Peter Henderson; Editing by Braden Reddall and Gerald E. McCormick)