Yahoo! Inc. (NDAQ:YHOO) shares jumped $4.50, or 15.97%, to $32.68 today after reports surfaced that Microsoft Corporation (NDAQ:MSFT) considering a buyout of the search engine in order to better compete with mutual-rival Google Inc. (NDAQ:GOOG). The combined company would more than double Google's market cap and close much the Google's lead in the search business.

The speculation began when the New York Post reported that Microsoft has asked Yahoo to enter formal negotiations for an acquisition that could be worth upwards of $50 billion - significantly higher than Yahoo's $38 billion market cap as of Thursday. Meanwhile, the Wall Street Journal is reporting that executives of the two companies are looking at a merger or some other kind of match-up, but cautioned that the talks are still in early stages.

The idea shouldn't come as that big of a surprise to investors - it's happened before! The two companies explored the idea of combining last year but the talks led nowhere. Now, both companies are feeling the pressure to compete with Google, which recently beefed up its portfolio with its $3.1 billion acquisition of DoubleClick, Inc. Google also won search deals last year with AOL and MySpace, which dramatically increased its lead in the search business.

So, what are the chances of a match-up at this point? Well, it is likely that the two will at least put together some kind of a search agreement in the near-term to compete with Google. Whether or not there will be a full scale merger remains to be seen. However, sources close to the situation also said that Microsoft's latest approach to Yahoo signaled an increased urgency - so we should know something soon!

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