Microsoft has stepped up its pursuit of a deal to buy Yahoo, as the two companies re-enter talks to strike a deal and fend off a common competitor in Web search engine Google.

The two companies have held informal talks over the years, but the latest approach comes as Microsoft seeks a deal to counter Google’s rapid growth.

"It’s been talked about for a long time, ever since Google came into the picture. I can’t imagine a more perfect deal," said Peter Lobravico, vice president, Risk Arbitrage Sales/Trading, Brokerage, Wall Street Access.

"You can’t find a stronger buyer than Microsoft and while it would spur a lot of political and regulatory noise, everyone knows in the end that the deal would go through."

Analysts often dismiss a takeover of Yahoo by Microsoft since the two companies have such different cultures and Microsoft usually prefers to buy small companies with interesting technology.

However, a deal could help Microsoft attract advertisers to its online businesses.

"We’ve been a significant believer in a Yahoo-Microsoft combination because Yahoo and Microsoft both need to create a bigger presence (in advertising) to compete with Google," said Marianne Wolk, an analyst with Susquehanna Financial Group.

Reuters