Microsoft eyes Yahoo! in proposed takeover

Still smarting from the loss of online advertising firm DoubleClick to rival Google last month, Microsoft is now actively pursuing search giant Yahoo!, the New York Post is reporting.

The paper cited sources who say Microsoft, having already made an offer to acquire Yahoo! several months ago, is now urgently courting the web firm to re-enter formal negotiations.

Yahoo!, which is valued at around $50 billion, is reported to have aggressively rejected the Redmond, Wash.-based software giant's initial attempts to discuss a takeover.

For its part, Microsoft is said to be more determined than ever to strike a deal after Google last month snatched DoubleClick for $3.1 billion from under its nose.

"They're getting tired of being left at the altar," one banking source, who has recently had talks with Microsoft , told the Post. "They now seem more willing to extend themselves via a transaction to get into the game."

Moreover, the move by Microsoft is seen as a necessary offensive, given Google is developing Internet-based software that directly competes with Microsoft Office, among other things.

Based on current estimates, a deal between Microsoft and Yahoo! would up the combined companies' share of the all-important search advertising market to 27 percent against Google's 65 percent, said the Post. It would also narrow the gap in overall online ads with Google to just 13 percent.

More importantly, the deal would create "the dominant force on the Internet" in terms of eyeballs, which directly translate into advertising dollars. Microsoft's MSN currently caters to an older audience while Yahoo!'s entertainment coverage attracts a younger demographic.

"Aside from cost savings, a deal would also create opportunities to use Yahoo! content on Microsoft devices, such as making music exclusively provided to Yahoo! Music available on Microsoft's Xbox game console and Zune music player," said the Post.