Microsoft is considering a fresh attempt to take control of Yahoo, sources close to the situation have told Reuters, more than three years after its first bid for the internet business failed,

The software giant launched a $44.6bn hostile bid for Yahoo in 2008 that was vigorously rebuffed by the company. Yahoo's share price has subsequently collapsed and the firm was valued at less than $18bn before Microsoft's renewed interest was reported.

Yahoo's shares soared by 10% on the rumour, which neither company would comment on, before falling back in after-hours trading. Peaking at $15.94, the shares were still barely half the value of Microsoft's $31-per-share offer in 2008.

Yahoo axed chief executive Carol Bartz last month and said the company was conducting a strategic review of its business, prompting speculation that it was a takeover target.

Goldman Sachs and media specialist Allen & Co are working with the firm and are believed to be sounding out potential buyers. Last month, several Yahoo employees in were told in a memo that the company's financial advisers were "fielding inquiries from multiple parties that have already expressed interest in a number of potential options."

Jack Ma, chief executive of Chinese internet company Alibaba, has already expressed an interest in buying Yahoo. The US firm owns 40% of Alibaba and Ma has previously sought to buy back the holding. The two firms have had a contentious relationship and Bartz was criticised for her handling of the Chinese firm, seen as one of Yahoo's best assets.

Other potential bidders include News Corp, buyout firms Providence Equity Partners, Hellman & Friedman and Silver Lake Partners and Russian technology investment firm Digital Sky Technology. Microsoft may seek a partner to go after Yahoo, according to Reuters' sources.

If Microsoft makes a bid it will be at a fraction of the price it was prepared to pay in 2008. That bid ended in failure after an intense four-month battle that eventually led to the resignation of Yahoo co-founder Jerry Yang, who has opposed Microsoft's move.

According to Reuters there are "two camps" within Microsoft. One group of executives believe buying Yahoo would be a 'knock-out blow' to rival AOL, leaving MS-Yahoo as the undisputed leading web portal. Others, though, believe Microsoft should focus on buying companies with more potential for growth.

Yahoo is still one of the biggest draws on the internet but it has lost out to Google and Facebook in the battle to win over advertisers.

At the time of the original bid Microsoft's chief executive Steve Ballmer said buying Yahoo was the best way to achieve scale online, an area where the software giant has trailed arch-rival Google.

The two firms started talking again in 2009 and Microsoft signed a 10-year deal with Yahoo to run its internet search advertising business. That deal was attacked by Google as an "attempt to exert the same sort of inappropriate and illegal influence over the Internet that it did with the PC."

Any new deal between the two firms is also likely to spark regulatory scrutiny and fierce lobbying from Google.

Tech analysts were sceptical about the chances of Microsoft bidding for Yahoo again, especially now it has secured the search advertising deal. They also argued that the sale process remains in its early stages.

http://www.guardian.co.uk/technology/2011/oct/05/microsoft-yahoo-software-internet-business?newsfeed=true