Mumbai: Microsoft Corporation has agreed to buy internet start-up Powerset, that is working on a new class of search that relies on `natural-language search,' rather than simple `keyword' search. The terms of the deal were not disclosed, but analysts estimate it at around $100 million..

Under the deal, Powerset's 53 employees would become part of Microsoft's search relevance team but continue working in the start-ups San Francisco office.

Powerset's `natural-language search,' a form of artificial intelligence that seeks to understand the meaning of both user queries and web pages, will complement existing technology developed by Microsoft Research and help "take search to the next level,'' said Ramez Naam, a Microsoft search executive.

The news of the deal comes less than three weeks after Yahoo rejected a second Microsoft proposal to pay $9 billion in exchange for Yahoo's search business and a 16 per cent equity stake in the software giant.

Redmond, Washington-based Microsoft plans to integrate at least parts of Powerset technology into Microsoft Live Search by the end of the year. Powerset's natural language search technology is a major differentiating factor from top internet search company Google and Microsoft plans to further develop on the Powerset search technology.

Powerset's search technology breaks down the meaning of words into related concepts, freeing users from having to type the exact words they want to find.

"Powerset has always been a small company with big dreams, with the ultimate goal of changing the way humans interact with computers through language," Powerset product manager Mark Johnson wrote in a company blog after announcing the deal.

The start-up has several-dozen staff, including academic experts in the field of natural language processing.

The acquisition would free Powerset of the resource limitations (cash and computing strengths) that slowed its development. And, since Microsoft's core search resources are quite good, users really seem to like the beta launch of Powerset even with a limited dataset.

Powerset co-founder Barney Pell said joining Microsoft would give Powerset the scale it needs to extend its technology to the entire Web. Powerset's approach to search requires enormous computing power. It is currently used to enhance Wikipedia searches, but can potentially improve the accuracy of Microsoft's Live Search product, he added.

Microsoft had, in January said it was buying Norway's Fast Search and Transfer ASA, a top provider of business web search services, for about $1.2 billion.

Over the last two years, Microsoft, has spent roughly $8 billion on internet buyouts, as well as $500 million trying to grow internally.

Nine of Microsoft's 15 acquisitions so far this year has also been in the internet sector.

The Wall Street Journal, meanwhile, reported that Microsoft was talking to several partners about taking another run at Yahoo.

Citing sources familiar with the developments, the report said Microsoft would buy Yahoo's search business and its partner or partners -  reportedly Time Warner and News Corp - would buy the rest.

The talks are preliminary and may not succeed, the journal said, adding, that Microsoft had snubbed Yahoo, which expressed renewed interest in a deal at a price that it had previously rejected.

Regulators, meanwhile, are likely to seek documents Google and Yahoo as also from other large companies in the internet and media industries.

Top search engine Google, with more than 60 per cent of the internet search market, and Yahoo, with 16.6 per cent share, agreed last month on an advertising partnership under which Yahoo will let Google put search ads on its site in a deal that Yahoo expects to gain $800 million in annual revenues.