Microsoft and Yahoo near ad deal-AllThingsDigital

* Microsoft, Yahoo may seal ad deal next week - blog

* Microsoft to pay Yahoo several billion dollars - blog

* Yahoo shares up 4 pct, Oppenheimer raises target

NEW YORK, July 17 (Reuters) - Microsoft Corp (MSFT.O) and Yahoo Inc (YHOO.O) are close to a long-discussed search and online advertising deal, which could be announced in the next week, according to the AllThingsDigital blog.

The two companies have talked about cooperating for months, after Microsoft's bid to buy Yahoo was rebuffed last year and Yahoo's attempt to seal a search advertising deal with Google Inc (GOOG.O) fell apart under regulatory scrutiny.

The latest discussions involve Microsoft paying Yahoo "several billion dollars upfront to take over its search advertising business and guarantee certain payments back to Yahoo," according to AllThingsDigital's Kara Swisher.

Yahoo is likely to take the lead on selling display advertising for the companies, she wrote.

Microsoft Senior Vice President of Online Audience Business Group Yusuf Mehdi, search head Satya Nadella, top digital executive Qi Lu and others flew to Silicon Valley on Thursday to iron out remaining issues, related with technology deployment, the blog said.

If all goes well, a deal could be announced within the next week, Swisher wrote, citing sources at both companies. But she cautioned that an agreement was not certain, since both companies have been in talks before.

Representatives for Microsoft and Yahoo declined comment. Yahoo is scheduled to report quarterly results next Tuesday, and Microsoft on Thursday.

Yahoo Chief Executive Carol Bartz said in May that any deal to spin off or combine its search assets will require a partner with "boatloads of money." She said at the time that Yahoo was talking "a little bit" with Microsoft, but gave no details.

Microsoft withdrew its $47.5 billion offer to buy Yahoo in May 2008 after Yahoo's board said the price was too low. The software giant then offered to buy Yahoo's search advertising assets for $1 billion upfront, and guarantee $2.3 billion in annual revenue for five years.

Google is the dominant player in the search market, with a 65 percent market share in June, according to comScore. Yahoo was second with 19.6 percent, while Microsoft was third with 8.4 percent. While Microsoft's share remains small, its new search engine Bing has won positive early reviews.

Shares of Yahoo rose 3.9 percent to $16.82 in morning Nasdaq trading. Oppenheimer raised its price target on Yahoo shares to $19 from $13.25, with a 'perform' rating, saying the company was likely to benefit from a rebound in large advertiser spending. [ID:nBNG426322] (Reporting by Tiffany Wu; Editing by Derek Caney)