Search giant Google has decided to bow out of a previously planned partnership with Yahoo!, after the United States Department of Justice (DOJ) objected to the deal on the grounds of antitrust issues.

Back in June, the two companies made an agreement entailing that some of Google’s online advertisements would appear next to various search results on Yahoo!, the revenue being set to be divided between the two.

Not long before, Yahoo! had rejected a takeover bid of $47.5 billion coming from Microsoft, many having reckoned then that the partnership with Google had been the former company’s attempt to overcome their financial issues without Microsoft’s help. The Web giant had estimated to bring in $800 million annually due to the deal.

Nevertheless, at the beginning of September, former Walt Disney vice chairman and Assistant Attorney General in charge of the Antitrust Division of the United States Department of Justice during the Carter administration Sanford Litvack was asked by the DOJ to investigate the Google-Yahoo! deal.

This week, the partnership’s terms have undergone major altering, by virtue of the antitrust concerns raised by the aforementioned institution, with the duration having been reduced from ten to two years, while Yahoo’s profit from Google’s ads having been limited to 25 percent of the total revenue coming from all the struggling company’s searches.

Despite these changes, Google has made the decision to call it quits, which probably leaves Yahoo! no other option than to seek help from Microsoft or AOL to cope with their current financial downfall.

The company has already taken some measures in order to do some damage control, having announced at the end of last month that they would be cutting their work force by approximately 10 percent to reduce expenses. Statistics have revealed that Yahoo’s net income for the third quarter of this fiscal year had gone down by 64 percent, most of which has been registered in their online advertising segment, severely affected by the economic crisis the U.S. are facing.

Moreover, some services are to be cut in the future, Yahoo hoping to reduce their annual expenses by over $400 million before the end of 2008.

On Wednesday, the company’s Chief Executive Jerry Yang stated that Microsoft should make another bid to take over Yahoo, although he did not give out any information concerning the number they were expecting to hear.

Analysts have estimated that a deal with Microsoft would entail $1.4 billion in cost savings and a net income of $725 million. Nevertheless, the software company has informed that they were no longer interested in purchasing the Web giant.

Another partnership, with Time Warner’s AOL unit, could also solve some of Yahoo’s problems, given that the latter operates the nation’s largest advertising network Platform-A, which in September this year drew more Internet users that both Yahoo and Google, with 91 percent of them having surfed a page on Platform-A that month.

A Yahoo ad page was visited by 86 percent of Web surfers, while a Google one, by 83 percent of them.