Yahoo! 'in talks with AOL'

AOL and Yahoo! are said to be in negotiations after the search engine rejected Microsoft's offer to buy the company.

The Sunday Telegraph has reported that Yahoo! is considering potential deals to help it prevent being bought out by Bill Gates' Microsoft.

Advisers from Time Warner-owned AOL and representatives from Yahoo! are said to have met to see if a deal would be possible.

Last week the search engine rejected an offer from Microsoft to buy out the company for $42 billion (£21.4bn).

It is thought that Rupert Murdoch's News Corporation is also interested, and has offered to buy a 20 per cent stake in Yahoo!.

The Sunday Telegraph reports that while details of the meeting between AOL and Yahoo! remain sketchy, it is thought that Google's small stake in AOL could prove a problem.

This is not the first time Microsoft has approached Yahoo! with an offer, two years ago the companies held talks over a merger to challenge Google.

Yahoo! rejected the proposals then, as now. Bill Gates' Microsoft claimed upon unveiling its present offer that it was the only alternative to challenge the dominance of Google.