DivX, a growing video compression software company, has announced that it has signed a two-year deal with Yahoo! that replaces a previous similar agreement DivX had with Google, according to Tom Huntington, a spokesperson for DivX.

As the terms of the contract state, DivX software will now be offered with a co-branded Yahoo Toolbar and a version of IE7 pre-configured with Yahoo tools. Yahoo!, in exchange, will now provide links to DivX and its online video service, Stage6, within the Yahoo toolbar.

Could Yahoo! possibly be a better partner for DivX than Google?

“We had worked with Google for two years and it was a good relationship. The deal we had with Yahoo was the most attractive to us at this time,” Huntington said. No financial details of the deal have been released, but both companies stand a chance of benefiting from this deal, especially DivX, which is quickly becoming a popular standard to encode videos in, whether viewing them on the web or sharing across the web.

?Our partnership with DivX gives Yahoo! the ability to offer our services to its growing global community, providing them with one-click access to the Yahoo! network. The partnership will also enable Yahoo!?s users worldwide to discover and benefit from the video technologies that DivX has to offer,? said Vish Makhijani, General Manager and Senior Vice President, Yahoo! Search.

Previously, Google?s search tools were bundled with DivX software, but this seemed less like a partnership, as I cannot recall any promotion of DivX by Google in exchange. Then again, Google has already established itself as the internet search leader, a spot which Yahoo! has desperately been trying to recapture. Perhaps, this is their way of directly stealing a piece Google's pie, so to speak.

Look for the new Yahoo partnered DivX tools to launch sometime in November 2007.

DivX Stage6 is no YouTube, but It looks like Yahoo! still has some tricks up their sleeve to win some of the market back from Google. The only question is, is it too late or do they still have time to make a difference? Could this mean some integration between Yahoo! Video and DivX Stage6?