UPDATE 2-Microsoft offered $9 bln for Yahoo stake, search deal

(Updates throughout with Microsoft exec e-mail, adds analyst comment)

By Daisuke Wakabayashi and Anupreeta Das

SEATTLE/SAN FRANCISCO, June 13 (Reuters) - When Yahoo Inc (YHOO.O: Quote, Profile, Research, Stock Buzz) turned down the latest offer from Microsoft Corp (MSFT.O: Quote, Profile, Research, Stock Buzz) this week, it walked away from $9 billion in cash and $1 billion a year in additional operating profit, Microsoft said on Friday.

In an e-mail to employees, Microsoft platforms and services division president Kevin Johnson said it had offered $8 billion for a 16 percent stake in Yahoo and $1 billion to buy Yahoo's search business and assume its operations.

The proposal also included a revenue-sharing partnership that would have delivered $1 billion a year in additional operating income to Yahoo due in part to a three-year guarantee of better rates for advertisements tied to its search results than Yahoo's current Panama advertising system.

Microsoft's most recent offer was an alternative to its previous full acquisition proposal. Instead, Yahoo entered an advertising agreement with Google Inc (GOOG.O: Quote, Profile, Research, Stock Buzz) on Thursday.

Microsoft, a dominant force in desktop software but a laggard in online search advertising, is still open to discussing its alternative proposal despite Yahoo's partnership with Google, a source familiar with Microsoft's thinking said.

Yahoo had no comment. Microsoft spokesman Jeff O'Mara declined to comment.

Another source familiar with the matter said Microsoft had proposed a 10-year exclusive deal to handle Yahoo's search advertising and only guaranteed higher advertising rates for three of those years. Johnson's e-mail did not mention the duration of the deal, only saying it was "long term."