Mumbai: Yahoo Inc may consider an alliance with internet rival Google Inc to fend off the $44.6 billion takeover proposal by software giant Microsoft Corporation, reports quoting sources close to the developments said.

Yahoo is considering a revival of talks with Google on an alliance as an alternative to Microsoft's $44.6 billion merger offer, reports said.

Reports also said several media, technology, telephone and financial companies are in contact with Yahoo, although they did not point to any alternative bid.

Yahoo executives said no decision has been made so far on consolidation proposals. "We want to emphasise that absolutely no decisions have been made - and, despite what some people have tried to suggest, there's certainly no integration process underway," Yahoo said in a memo to employees.

Analysts, however, say Google is an unlikely winner in a bidding war as it would have difficulties in getting approval from anti-trust regulators.

Google only would like to see the Microsoft alliance plan thwarted. In fact, Google chief executive Eric Schmidt is said to have called Yahoo's chief Jerry Yang to offer help.

Google also accused Microsoft of seeking to extend its computer software monopoly deeper into the internet realm.
 
A Microsoft-Yahoo combination could undermine competition on the web, David Drummond, Google's chief legal officer, said in a blog release. He also called on policy makers to challenge the merger plan.

Microsoft responded by saying that its merger with Yahoo could create a "compelling number two competitor for internet search and online advertising" to market leader Google.

Microsoft also cited industry data showing Google has a 75 per cent share of the web search revenue worldwide against the collective Yahoo and Microsoft revenue of around 20 per cent.

Microsoft's $44.6 billion bid values Yahoo at $31 a share, which the latter considers as gross undervaluation.

By seeking an alternative bidder, Yahoo management hopes to unlock the underlying value of Yahoo assets, which it estimates to be over $39-45 a share.

Microsoft's bid gave a boost to Yahoo shares in Asia when they opened on Monday. Yahoo Japan was untraded due to a flood of buy orders, on hopes a potential deal between Microsoft and Yahoo would boost the Japanese firms' competitiveness.
 
At $44 billion, the Microsoft proposal, if accepted., would be the biggest deal so far in the media and technology sectors. It would dwarf all previous deals in the online field, including Google's acquisition of dMarc ($1.1 billion), Publicis's acquisition of Digitas ($1.3 billion), Google's acquisitions of YouTube ($1.65 billion) and DoubleClick ($3.1 billion), and Microsoft's acquisition of aQuantive ($6 billion).