Rumours point to Microsoft acquisition of Yahoo

Microsoft has been studying a possible acquisition of the Yahoo online portal and search engine, according to a report in the business newspaper The Wall Street Journal.

Citing unnamed sources, the paper claims that a faction within Microsoft is lobbying to have the company purchase a stake in the search provider, but that such plans currently are on hold.

Yahoo, at its current stock price, is valued at roughly $45bn and Microsoft would have to pay a premium on top of that for an acquisition to be approved.

Microsoft is known for its reluctance to make major acquisitions. The company is furthermore investing significantly in its MSN group and Live Software initiative, indicating that the firm is looking to grow its web business organically rather than by acquisition.

A partnership would also need support from Yahoo co-founder Jerry Yang, who would be instrumental in getting shareholders to agree to the deal ( click here for more Yahoo news).

A Microsoft-Yahoo combination would allow Microsoft to more effectively compete with Google. The latter has succeeded in outpacing the competition despite Microsoft's recent investment focus in its online division ( click here for more Microsoft news).

Google is believed to be preparing products including an online text editor that will intensify the competition with Microsoft's core applications such as Office ( click here for more Google news).