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Eric Schmidt

The whole Microsoft-Yahoo search saga has always felt like a soap opera, starting with Microsoft’s failed bid to acquire Yahoo in 2008, and continuing to the present-day shakiness of their search partnership. And here’s another potential plot twist.

Eric Schmidt, Google’s executive chairman and former chief executive, reportedly said during an appearance in Japan overnight that Google “would love” to replace Microsoft as Yahoo’s search partner. Forbes contributor Eric Jackson does a nice job tracking this down after seeing a fleeting mention of Schmidt’s remarks on the Dow Jones wire early this morning.

The subplot here is former Googler Marissa Mayer’s new position as Yahoo CEO, and the potential inroads that creates. Microsoft has seen this type of thing play out before — in fact, it has done something similar in its Nokia partnership, spearheaded by Nokia CEO and former Microsoft exec Stephen Elop.

Under the terms of their search deal, Yahoo has a potential way out of the Microsoft partnership if it doesn’t live up to financial benchmarks. Danny Sullivan published an extensive analysis of this in July that’s worth a read for more details.

The other issue is the antitrust hurdle that Google would face. Google’s original plan to partner with Yahoo (before the Microsoft deal came together) fell apart in the face of the U.S. Justice Department’s antitrust objections.

Since then, Yahoo’s market share has slipped substantially, but Google remains the king of the pile. Google would be taking a huge risk if it actively pursued Yahoo, reopening that can of worms … but at this point, nothing in this soap opera would qualify as a surprise.

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