Yahoo and Microsoft extend search revenue agreement

Yahoo stock hits five-year high, closing above $26 for first time since 2008

Microsoft had extended the guarantee of search revenue that it provides to Yahoo, as per the companies' search partnership, it was noted in a filing with the Securities and Exchange Commission on Tuesday.

In 2009, Yahoo and Microsoft signed a 10 year lincensing agreement, which allows Microsoft Bing to power Yahoo's Web search .The deal allows Yahoo to control the look of its own search site, but the Bing search engine provides the results.

As per the agreement, Yahoo is entitled to 88% of the revenue generated from Microsoft’s services on Yahoo! Properties for the first five years of the deal. In addition, Microsoft agreed to pay Yahoo for revenue per search (RPS) for the first 18 months "after the transition of paid search services to Microsoft’s platform in that market.”

The first 18 months of that guarantee expired in the fourth quarter of 2011, but it was extended for an additional year and half, until March 2013. The two parties have now agree to extend it another 12 months, with Microsoft 

On April 30, 2013, Microsoft extended the RPS Guarantee in the U.S. for an additional 12 monthsextended the guarantee on April 30, retroactive to April 1st, 2013. The deal will presumably expire at the end of March 2014, when the two sides will once again be forced to extend it.

In addition to the Microsoft extention, Yahoo also noted some good news regarding its investment in Chinese e-commerce company Alibaba.

Alibaba's revenue grew 80% year-to-year, as of the three months ending in December 2012, from $1 billion to $1.8 billion. Yahoo, which sold back half of its 40% stake in Chinese e-commerce company Alibaba this past September for a total of $7.6 billion, still owns a sizable amount of the company’s stock, around 23%.

Alibaba is expected to try to go public in the near future, and Yahoo's stake in the company could prove to be a financial windfall.

Investors reacted favorably to this news, as Yahoo shares hit nearly a five year high in trading Tuesday.

Shares of Yahoo were up 3.58%, or 90 cents, to end trading at $26.07 a share. This is the first time that the stock has closed over $26 since June 11, 2008. A lot of the credit for Yahoo's turnaround has to go to Marissa Mayer, who took over the CEO position in July of last year. Since her arrival, the stock has risen 67%.

Microsoft's shares dipped 1.3% Tuesday, down 44 cents to $33.31 a share.

The filing was first reported by Reuters Tuesday.

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