Software giant Microsoft is keen to acquire a majority stake in Yahoo Inc, according to media reports.

Microsoft had approached Yahoo a few months ago, but Yahoo -- valued at $50 billion -- had turned down the offer of a merger or an acquisition. However, New York Post says that the two giants have now reopened talks to forge some alliance to take on the formidable challenge posed by the Internet giant Google.

Microsoft plans to take Google head on with the acquisition of, or merger, Yahoo. Google has dominated the online search and Web advertising space so far and with each passing minute the search goliath is becoming stronger.

A deal between Microsoft and Yahoo will give both an edge over online rival Google, say media reports.

This would also hike the companies' share in the search advertising market to 27 per cent as against Google's 65 per cent, says the New York Post.

The talks that had failed earlier seem to have been revived following management changes at Microsoft and Yahoo, said the Wall Street Journal. The talks are currently said to be in early-stage discussions.

Microsoft is a giant compared to Yahoo, but the software major's revenues from online businesses are paltry. A pact between the two companies could help both, as Yahoo will help power Microsoft's online earnings and in turn will get a lot more MS-backed muscle in return.

Yahoo shares on the Nasdaq shot up by more than 13 per cent on the rumours of a possible acquisition. But, both, Microsoft and Yahoo have declined to comment on any market speculation, the WSJ reported.

Although there is a strong buzz that the two firms may merge or come into some sort of an alliance, the WSJ also said that the deal may fall through due to likely opposition from some top Yahoo executives like co-founder Jerry Yang.