Microsoft may buy Yahoo!

According to the New York Post, Microsoft (NASDAQ: MSFT) has approached Yahoo! (NASDAQ: YHOO) to have formal talks about buying the web portal company.

Microsoft has been struggling to get its own portal and search initiatives on track. It current trails Yahoo! and Google (NASDAQ: GOOG) in share of the search market.

In many ways the deal makes sense. Yahoo!'s shares are off 20% over the last two years and its growth rate in the last quarter was barely 10% on the revenue line. Over the same two years, Google's stock is up over 110% as it continues to grow at a pace of over 60%.

Microsoft could use Yahoo! to improve its search market share. It currently runs around 10% compared to Google's share of almost 50%.

Douglas A. McIntyre is a partner at 24/7 Wall St.