It’s no secret, after CEO Carol Bartz was fired a few weeks ago, that Yahoo! is actively exploring its options, up to and including putting itself up for sale.  At AsiaD, Yahoo! co-founder Jerry Yang explained:

“The intent going in is not to put ourselves for sale.  The intent is to look at all the options.”

After Microsoft launched an unsuccessful bid to acquire Yahoo! in 2008, the two companies then formed an alliance to bring Bing search technology to Yahoo! properties.  Yang noted at AsiaD that while both sides continue to work hard, revenues from the alliance for Microsoft have been less than expected:

I would probably venture that the Microsoft folks would say the partnership hasn’t gone the way they wanted

So it comes as no surprise to many Microsoft watchers that Microsoft has a vested interest in Yahoo!’s future, and may be considering another attempt at acquiring the company.  According to an article dated October 20th in the Wall Street Journal, they may be doing just that:

Private-equity firm Silver Lake Partners is working with one of its investors, the Canada Pension Plan Investment Board, and Microsoft Corp. to put together a proposal to buy Yahoo Inc., people familiar with the matter said.

Under the proposal being discussed, Microsoft would put up several billion dollars of funding, with additional financing being arranged by banks, the people said. Silver Lake and the CPP Investment Board would kick in the rest of the amount, which would be less than what Microsoft contributes, the people said.

The report comes some two weeks after a similar report from Reuters, with some of the same partners supposedly involved.  Yahoo!, while its growth has stagnated, does have a core of assets that could make an acquisition (with a subsequent sell-off of portions of the company, such as its 40% stake in China’s Alibaba, or its stake in Yahoo! Japan).  Reuters quotes a Wall Street analyst on Yahoo!’s value:

One Wall Street analyst recently valued Yahoo at just over $20 billion, with its core search and display advertising business worth $7.7 billion, its Asian assets worth $9.2 billion, plus $3.2 billion in cash.

Although Microsoft CEO Steve Ballmer appeared to laugh off any talk of a Yahoo! acquisition while onstage at the Web 2.0 Expo yesterday, a fully combined Bing/Yahoo! search market share (potentially including full Bing branding, something that is lacking with the alliance now), a combined set of MSN/Yahoo! properties, and even potential new markets through Yahoo! Mail and Messenger for the likes of Skype, could make sense.