Microsoft is still eyeing Yahoo's search business, but says a full buyout is definitely off despite the internet firm's low share value.
Yahoo's share price has plummeted since Microsoft's offer of $33 a share in February last year, with share prices hovering around $13 dollars.
Steve Ballmer, Microsoft's chief executive, said in Las Vegas this week that a full acquisition of Yahoo was a thing of the past.
Ballmer reiterated Microsoft's interest in Yahoo's search business this week, saying the management transition at both companies was an opportune time to do a deal.
Microsoft appointed former Yahoo search head Qi Lu to lead its online operations in late 2008 and Yahoo is still searching for a successor for outgoing CEO Jerry Yang.
Yahoo is expected to make an announcement as early as next week or by the end of January at the latest, according to The Wall Street Journal.
Ballmer told the Financial Times that if a search deal is to be made, it is probably to be made in the interim period for new leaders in both places.
Microsoft is seeking to bolster its position against Google, beating out its rival in search deals with Dell and Verizon Wireless announced this week in Las Vegas.
Earlier in the week, the Tech Crunch blog site said some technology sector executives were planning to borrow $20bn from Microsoft to buy Yahoo for $15 a share.
Bloomberg later dismissed the deal, citing unnamed sources as saying Microsoft was not discussing any financing plan for a Yahoo deal.