With all the speculation over Microsoft pursuing a Yahoo! acquisition on the one hand, and on the other, counter speculation regarding possible pitfalls of such an integration, latest reports have cleared the air... to a certain extent...

It is learnt that Microsoft-Yahoo! merger talks are no longer active, even as possibilities of mutual co-operation between the two remain.

Which means, there is still room for Microsoft and Yahoo! to cooperate as part of a partnership or a JV (joint venture), in which Microsoft will likely spin-off some of its online properties to Yahoo!, a report in the Wall Street Journal says.

The report reads, "both companies discussed a possible merger or other match-up that would pair their respective strengths."

A Microsoft-Yahoo! merger, had it happened, was being seen as a potentially powerful combined front versus Google's dominance of online search and advertising.

As several analysts pointed out, a combination of not only the two companies' Internet efforts, but also that of their client and consumer bases would have created a very strong competitor against Google.

Yet, they were also quick to point out the possible challenges of such a merger, especially in the areas of culture, control, and cost.

All said, Yahoo! would have been no mean acquisition for Microsoft... With a market capitalization of around $42 billion, the Yahoo! deal might have qualified as the largest attempted in Microsoft history...