Yahoo and Google talks have not cooled

CHICAGO (Reuters) - Yahoo (YHOO.O) and Google (GOOG.O) are continuing to talk about a search advertising partnership, but an announcement was not imminent, two sources familiar with the talks said on Thursday.

Talks have "not cooled" in recent days after Microsoft (MSFT.O) withdrew its offer for Yahoo, one of the sources said.

Although talks remain fluid, a deal could come "as early as next week," the second source said. Both sources spoke on condition of anonymity.

The two Internet companies began discussing a partnership in which Yahoo would carry advertising from Google alongside its own search results after Microsoft made its unsolicited offer for Yahoo, initially valued at $44.6 billion (23 billion pounds), more than three months ago.

Yahoo searched out alternative tie-ups after rejecting Microsoft's offer, and held talks with Time Warner's (TWX.N) AOL unit and News Corp NWSa.N, other sources have said.

On May 3, Microsoft walked away from a sweetened $47.5 billion offer for Yahoo and has shown no signs of renewed interest in the company.

Billionaire investor Carl Icahn has amassed a Yahoo stake, and on Thursday mounted a proxy campaign to unseat Yahoo's board.

Google executives have expressed some reservations about the regulatory issues surrounding a partnership with Yahoo, one of the sources said. But both companies remain in contact with regulators and any deal would be structured to pass regulatory scrutiny, the source said.

(Reporting by Anupreeta Das; Editing by Toni Reinhold)