Rumours abound that Microsoft is prepared to stump up $20 billion (£13 billion) for Yahoo.

The proposal forms the centrepiece of a complex transaction that would see Microsoft support a new management team to take control of Yahoo. However, it doesn’t appear that Microsoft will be aiming for a full takeover of the web giant (looks like they’ve learnt a lesson after having their fingers burnt once…twice…or was it three times?).

There have been rumours cirulating that former AOL CEO, Jonathan Miller, and Ross Levinsohn, a former president of Fox Interactive Media, are being positioned to head up the new management team. Although it’s widely believed that senior management at both Microsoft and Yahoo have agreed the deal there’s no guarantee that it will succeed.

Yahoo isn’t really in a position to argue though; when the first Microsoft bid was launched the search pioneer was valued at $33 per share - right now, it’s about $9 per share.

A number of commentators are suggesting that now is the ideal time for Microsoft and Yahoo to work towards a new deal, although, if you think about it, Yahoo don’t really have much say in what happens. It really is a case of ’sink or swim’ and Microsoft is holding the life preserver!

The deal between Yahoo and Microsoft will see Redmond obtaining a 10-year operating agreement to manage the search business. Microsoft would also receive a two-year call option to buy the search business for $20 billion. This would leave Yahoo to concentrate on their core business: e-mail, messaging, and content services.

This deals allow Microsoft to attempt to recoup some the ground lost to Google. Microsoft’s search efforts have only managed to give them a rather miserable 5% of the market share in contrast to Googles 77%. Adding Yahoo’s search customer base to this figure would, theoretically, give them about 23% of the market.  That said, a large number of Yahoo search users favour it because ‘it’s not Google and it’s not Microsoft’!

Microsoft may own the desktop but, when it comes to the web, they’re rapidly slipping behind. Steve Ballmer has said he is not interested in buying the whole of Yahoo company, but has expressed a strong interest in buying the search business. Maybe the days of Microsoft’s stranglehold are coming to an end only to be replaced by Google!

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