Microsoft is in pursuit of search engine firm Google, recently valued at between $15bn and $25bn.
The software giant is said to want to buy or perhaps merge with the Silicon Valley firm, according to reports in the New York Times.
Microsoft is keen to make headway in the search business, and the newspaper reported that the software giant had approached Google within the past two months to discuss the options, including the possibility of a takeover.
However, the report said that Google showed little interest, favouring the initial public offering route, but that Microsoft may continue its pursuit at a later date.
Tony Lock, chief analyst at Bloor Research, suggested that the pair would fit well together.
"There's a very neat, logical fit between the two organisations," he said.
"Microsoft has spent the last three or four years promoting the functionality of its website to make it a portal on the world with Google-like capabilities.
"A deal between the two would extend its appeal beyond the Microsoft community.
"Google is the de facto point of reference for many people. It is amazingly successful. Any publicity it receives with an IPO looming is good publicity, but it will be fascinating to see what happens."
A Microsoft spokeswoman insisted that the company "does not comment on rumour and speculation".
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