Microsoft wooing Yahoo! in battle with Google


NEW YORK -- Microsoft Corp. is resuming its pursuit of search engine operator Yahoo! Inc. that could help it better compete with Web search leader Google Inc., published reports said Friday.

Yahoo! shares surged more than 18% in morning trading.

The New York Post reported Friday that Microsoft has asked Yahoo! to enter formal negotiations for an acquisition that could be worth $50 billion. Yahoo!'s market capitalization was about $38 billion on Thursday.

Microsoft, based in Redmond, Wash., had no immediate comment on the report, spokesman Lou Gellos said Friday.

The Wall Street Journal said executives of the two companies are looking at a merger or some other kind of matchup and said the talks appear to be early-stage discussions. It said the companies explored the idea of combining last year but the talks led nowhere.

The newspaper reports each cited unidentified people familiar with the situation.

Microsoft is feeling increasing pressure to compete with Google, which plans to beef up its portfolio with a $3.1 billion purchase of online advertising company DoubleClick Inc.

Microsoft currently trails both Yahoo! and Google in the lucrative and growing business of Web search.

Google won a search advertising deal with AOL in 2005 that the Post said Microsoft wanted. In addition, Google is developing Web-based software that directly competes with Microsoft Office.

The Post story said Microsoft and Yahoo! have held informal talks over the years and said Microsoft's latest approach to Yahoo! signals increased urgency.

Earlier this week, Yahoo! said it would buy 80% of advertising exchange Right Media for $680 million, increasing its stake in that company to full control.

Yahoo! shares surged $5.22, or 18.5%, to $33.40 in morning trading, while shares of Microsoft fell 51 cents to $30.46.