By Angela Chen 

Yahoo Inc. and Microsoft Corp. have updated their search partnership to allow more flexibility in how the results are presented and how the advertising teams are managed.

The news comes after months of negotiation over a deal that has caused friction between the two tech giants. Shares of Microsoft slipped 24 cents in morning trading to $42.01, while Yahoo shares dropped 5 cents to $45.68.

The new terms update the 10-year agreement struck in 2009 by the predecessors to the companies's current chief executives, Microsoft's Satya Nadella and Yahoo's Marissa Mayer. The agreement allowed for terms to be re-evaluated at the five-year point.

Under the original agreement, Microsoft provided Yahoo with search services on computers, controlling the technology underpinning searches across both companies' sprawling universe of websites. Yahoo, in turn, handled sales of search ads for both companies. But in recent years, Yahoo has chafed at elements of the partnership, which generates 37% of its revenue.

Now, Yahoo will have more control over how search results are presented on both desktops and mobile devices, though it will continue using Bing for a majority of its desktop search traffic. Microsoft will take over the job of selling ads for Bing, while Yahoo will continue handling its own ads for Gemini, the company's native ad marketplace.

Microsoft and Yahoo will then integrate the sales teams with the engineering teams to "allow both companies to service advertisers more efficiently, " the companies said. That transition will occur this summer.

The original revenue-sharing pact had Microsoft paying Yahoo 88% of the search revenue generated from its sites during the first five years of the agreement, the companies then said.

Ms. Mayer, a former Google Inc. search executive, had made it clear she was unhappy with the terms. Yahoo's revenue per search has been worse under the Microsoft deal than when it operated its own Web-search technology and advertising system. Ms. Mayer has worked to bulk up Yahoo's Web-search technology and ad sales in areas that don't infringe on the agreement with Microsoft, such as searches done on mobile devices.

Neither Yahoo or Microsoft alone can hope to attract the number of searches executed by Google. Before Yahoo and Microsoft teamed up in search, the two companies together handled about 28% of Web searches in the U.S. In February, their combined market share amounted to 32.6% of U.S. desktop searches, according to comScore Inc.

The halfway point of the 2009 contract passed in February. In late March, the companies mutually agreed to extend the deadline to April 24.

Representatives for both companies weren't immediately available for further comment.

Write to Angela Chen at angela.chen@dowjones.com

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