One of the reasons Wall Street investors have gone sour on Yahoo’s stock since its online advertising and search partnership was struck with Microsoft was a comment that CEO Carol Bartz made at the seventh D: All Things Digital conference in late May.

In an onstage interview with me, I asked Bartz about what it would take to do a deal.

She answered quite emphatically that “if there’s boatloads of money, and there’s the right technology and there’s the right information we’d have, sure.”

Here’s the video of that, as well details about how the deal talks went bad at D7 too.

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Isn’t it ironic that Yahoo once employed–and for a very long time–top search techie Qi Lu and here he was on stage at the Financial Analyst Meeting at Microsoft HQ in Redmond, Wash., after having just scooped up that business for the software giant.

Lu, who is now president of the Online Services division at Microsoft, was not generous with the details, although he did say making the partnership work was his No. 2 priority after Microsoft’s own search business.

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BoomTown was so glad we had this time together with Yahoo CEO Carol Bartz and Microsoft CEO Steve Ballmer, just to have a laugh or sing a song about a major search and advertising deal.

I liveblogged the conference call, which I updated as it happened.

Did Ballmer scream and jump up and down? Did Carol say something naughty?

Read on!

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Finally.

After a decade of competition, several years of push-me-pull-you partnership talks among innumerable execs come and gone and even a hostile takeover that went bad, Yahoo and Microsoft have officially struck a landmark 10-year search and online advertising deal.

While it is in no way as sweeping as some had expected, the deal marks the most important union of digital companies in recent times.

“In simple terms, Microsoft will now power Yahoo! search while Yahoo! will become the exclusive worldwide relationship sales force for both companies’ premium search advertisers,” said the two companies in a joint press release.

Here are the particulars.

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According to several sources close to the situation–under the terms of a pending large-scale deal, in which Yahoo would sell search advertising for its sites and some of Microsoft’s, while Microsoft search technology would power it–Yahoo would get to keep pretty much all the revenue and more for the next three years.

Sources said that in the first two years of the partnership, which is expected to be announced tomorrow, Yahoo would keep 110 percent of all revenue. And, in the third, Yahoo would get 90 percent.

That could represent many billions of dollars, since Yahoo will be selling for both companies.

For Microsoft, the payment will–within four years–allow the company to become the de facto No. 2 search technology player after Google.

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As BoomTown reported earlier today, Yahoo and Microsoft have struck a search and online advertising partnership that sources said will be announced tomorrow.

But it is eminently instructive to look at the deal that Microsoft had offered Yahoo almost exactly a year ago, which was rejected by Yahoo in favor of a competing bid by Google.

The Yahoogle deal, of course, failed, after regulators looked askance at a partnership of the No. 1 and No. 2 search players.

The new deal between Yahoo and Microsoft, according to sources, certainly seems a lot smaller than the one offered last June, although there might be a surprise yet to come.

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Multiple sources close to the situation said that the online search and advertising deal between Microsoft and Yahoo has been struck and will be announced within the next 24 hours.

While it is not clear if the actual papers have been inked or approved by the boards of the two companies, sources said it was a formality and that negotiations are complete on a deal that is less sweeping than originally conceived.

In any case, making any partnership is likely to be the cause of much relief at both companies, since they have been trying–without success–to join together to mount a better offense in the search sector against the dominant Google.

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Things are as tight as a tick over at Yahoo and Microsoft about the deal the pair have been discussing over the last months–as execs shuttle back and forth and forth and back and their boards deliberate on what will surely be one of the most important decisions for either company for the near-term future in the digital space.

As various reports debate the terms of the deal, it is critically important to remember that, done badly or with too much haste, this massive and extremely complex deal is one with even greater potential to tank.

“It could be game-changing or it could be one the biggest bombs ever,” said one exec close to the situation. “So, obviously, everyone is treating this very delicately.”

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And there it was in Yahoo’s second-quarter earnings call yesterday, when–as the first question–an analyst asked Yahoo CEO Carol Bartz what she thought about Bing, the new and innovative search offering from Microsoft.

“I think actually Bing is a good product,” said Bartz. “I think they’ve done a good job. I think Microsoft should be given kudos for Bing.”

It was a politic thing to say, to be sure, especially with Microsoft and Yahoo still zeroing in on a search and online advertising partnership deal, as has been previously reported by BoomTown.

Sources I have spoken to over the past two days say the deal is still on good footing and could be struck very soon, even as early as tomorrow, although it is still not a certainty–especially given the bumpy history between Yahoo and Microsoft.

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If there’s an earnings call at Yahoo, you know BoomTown is going to liveblog it!

Will Yahoo CEO Carol Bartz say something naughty? (Nope!) What is new CFO Tim Morse like? (Nice!) Will they say anything about the talks with Microsoft about a search and online advertising partnership? (No!)

Oh, it might be a corker!

The earnings results for the second quarter certainly were not.

Here’s the conference call, updated as it happened.

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After his 100-day VisionQuest to figure out what to do at AOL, Tim Armstrong is in a chattier mood.

So, BoomTown did not waste a New York minute in getting on the horn with him to finally hear his take.

There’s not a lot of new stuff to reveal, of course, beyond what Armstrong has already said about AOL’s new direction.

That would be a spinoff in November, a focus on advertising, content, local, communications and starting a venture unit. But there is also the question of AOL’s ad deal with Google and more.

Here is the interview.

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Yesterday, shares of Netflix got their semiregular rocket boost–with its stock up more than five percent to close at just over $42–from rumors that Amazon was interested in acquiring Netflix.

Oh, it’s a seemingly dreamy match–the top online retailer snapping up the upstart U.S. mail-order DVD movie and television show service.

But there are some serious issues in an Amazon-Netflix marriage, so those interested in seeing the independent company in the embrace of a larger one might want to consider a more suitable and very interested candidate: Microsoft.

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Oh, they’re still talking. Except when they’re not. And, then, they are.

Such has been the course of discussions Yahoo and Microsoft continue to be engaged in about a possible partnership deal around search and online advertising.

“It runs hot, then cold, then hot, then who knows,” said one person close to the situation.

It’s kind of like a digital version of the romantic travails of Lindsay Lohan and Samantha Ronson, minus the paparazzi and screaming matches in trendy clubs.

Here’s an update of the talks.

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In BoomTown’s bold quest to annoyingly stick a Flip digital video camera in the face of every Yahoo senior exec, this week I worked the last nerve of its CTO and EVP of Products, Aristotle “Ari” Balogh.

Actually, the 45-year-old Balogh is a very calm and pleasant man, especially considering the huge responsibility that has been foisted on him by CEO Carol Bartz to rejigger how Yahoo makes its products and services and deploy its technology in a more efficient, centralized and, most of all, innovative manner.

To explain all this, Balogh sat down with me twice–he is clearly a glutton for punishment–to talk about where Yahoo stood as it sought to dig itself out of its long slump and reemerge as the potent Internet force it once was.

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BoomTown once asked Microsoft CEO Steve Ballmer if the software giant was ever going to be able to catch No. 1 Google in market share in the increasingly lucrative search arena–despite years of trying and billions in investment in its Web businesses overall.

“We don’t actually have to catch the leader,” answered the pugnacious tech leader. “We just have to surpass the No. 2 to have a great business.”

No. 2 is Yahoo. And now, with a recently revamped search offering called Bing showing some promising signs, Ballmer shot another one across its bow by telling an audience yesterday that he was ready to spend billions more to win the race.

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