LOS ANGELES, May 5: Microsoft Corp. has stepped up its pursuit of Yahoo Inc., seeking to create a united front against arch-rival Google Inc., two newspapers reported on Friday.

Yahoo shares rose nearly 9 per cent to $30.58 in Nasdaq trading, while Microsoft shares fell 1.36 per cent to $30.55.

Google was off $2.27 at $470.96.

Yahoo shares, up as much as 19 per cent during the day, pulled back after a report in the New York Times that the two companies may work out a joint venture of some other sort of cooperation that stops short of a full merger.

Microsoft and Yahoo have held informal talks over the years, but the latest approach comes as the software company 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 of risk arbitrage sales/trading at brokerage Wall Street Access.

The New York Post said on Friday Microsoft made an offer to buy Yahoo a few months ago, but Yahoo spurned the advances. The paper, putting a price tag of $50 billion on a Yahoo takeover, said that discussions continue between the two companies.

Yahoo’s market capitalisation shot to $45 billion, from $38 billion before the report. Microsoft’s market value is a little more than $300 billion.

Both companies declined to comment on the reports.

Investment bank Goldman Sachs is advising on the process, the paper said. The bank declined to comment. One banking source said that investment banks had been pitching Microsoft on the idea of buying Yahoo for months.

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.

If Microsoft decided to buy Yahoo, it would be the largest acquisition the company has ever done. Its current largest purchase was a $1.33 billion deal in 2002 to acquire Navision, a maker of business software.

Google, the market leader in Web search, is extending its lead on both companies as it continues to gain market share and grow three to four times faster than Microsoft and Yahoo.—Reuters