Yahoo! Inc. has agreed to let Google Inc. sell some of the advertisements it runs alongside Internet searches, seeking to shore up sales after ending talks with Microsoft Corp. about a combination.

The deal may add $800 million a year to sales, Yahoo, based in Sunnyvale, Calif., said Thursday in a statement. The companies will delay implementing the program for up to 3 1/2 months, to give the U.S. Justice Department time for review.

Yahoo shares sank 10 percent Thursday after the company said talks with Microsoft had failed. The partnership with Google may boost the amount of money Yahoo gets when people click on ads, part of Yahoo Chief Executive Officer Jerry Yang's effort to deflect criticism from investor Carl Icahn, who says Yang scuttled a $47.5 billion bid from Microsoft.

"Abdicating search to Google puts Yahoo in an untenable strategic position in order to obtain short-term gains," Soleil Securities Group Inc.'s Laura Martin said in an interview.

The agreement with Google, which covers sites in the United States and Canada, may add as much as $450 million in operating cash flow in the first 12 months, Yahoo said. The agreement isn't exclusive, meaning that other companies, in addition to Yahoo and Google, will be able to sell ads to appear on Yahoo's pages. Yahoo's revenue last year was $6.97 billion.

Yahoo fell 7 cents to $23.45 in extended trading after the announcement. The shares declined $2.63 to $23.52 at 4 p.m. New York time in Nasdaq Stock Market trading, the most in a month. Microsoft, based in Redmond, Wash., advanced $1.12, or 4.1 percent, to $28.24.

The agreement may set up an antitrust fight over whether it hurts competition. Microsoft has said a deal between Yahoo and Google, based in Mountain View, Calif., will put more than 90 percent of the search ad market in Google's hands.

The Senate Antitrust Subcommittee will examine the arrangement, said Chairman Herb Kohl, a Wisconsin Democrat.

"This collaboration between two technology giants and direct competitors for Internet advertising and search services raises significant competition concerns," Kohl said Thursday in an e-mailed statement.

Google handles almost two-thirds of all searches in the United States. The company got as much as 70 percent more than Yahoo for search ads at the end of last year, according to Yahoo.

Microsoft isn't interested in buying all of Yahoo, even at the $33-a-share price it wanted before the end of earlier discussions May 3, Yahoo said Thursday in a statement. Microsoft had proposed buying just Yahoo's Internet search business, and Yahoo directors declined.

Microsoft offered $35 a share for 16 percent of Yahoo as part of an alternative agreement, the Wall Street Journal reported, citing unnamed people.

The Yahoo-Google agreement has a four-year initial term, and two three-year renewals, at Yahoo's option. Advertisers will pay Yahoo directly for ad clicks through its Panama advertising system, and pay Google for Google ads that appear on Yahoo's pages. Google will share a percentage of that revenue with Yahoo, according to the statement.

The deal can be ended by either side if there's a change of ownership at Yahoo or Google. If Yahoo is bought within two years, it will have to pay a termination fee of $250 million. That fee may be reduced by revenue earned by Google from the agreement.