Gates wants Google merger

Microsoft boss Bill Gates wants to merge with Google in a deal worth £10 billion or more.

The marriage between the world's biggest computer software manufacturer and the world's biggest search engine could create a massive new operation which would cement Gates's domination of the computer business.

The news emerged today when the New York Times reported that Google is engaged in meetings to explore a partnership or even merger with Microsoft.

Google - which has experienced astonishing success to dominate the internet search engine market - is also considering floating for the first time, with a radical plan to sell shares in itself over the internet.

Google bosses are said to be most interested in this plan but Microsoft is unlikely to be put off and may continue to pursue the company after the flotation, according to one executive briefed on the discussions.

But any moves by Microsoft to merge with Google would be closely watched by US antitrust authorities which launched a massive legal action against Microsoft over its war with the search engine Netscape. Microsoft has been increasingly desperate to get into the search engine business which attracts millions of users and hundreds of millions of hits a day for Google, the most popular search site on the web.

The software company's overtures show how much it regards the search engine as a real competitive threat to its presence in the internet.

Microsoft is pushing further into internet-related services and is integrating its software more closely.

Silicon Valley insiders are comparing Microsoft's current obsession with search engines to its fight with Netscape in the Nineties.

Netscape launched the first popular browser, triggering a frenzy of competition from Microsoft which mobilised its vast resources to produce a rival browser that it tied into its other software.

It eventually overtook Netscape and virtually killed the company. It was partly this episode that prompted a massive anti-trust suit by the government against Microsoft which ended two years ago.

Today, Microsoft in London said the company did not comment on "rumour and speculation".

Google has already begun the process of talking to investment banks in order to choose which ones will handle its shares offer.

Wall Street analysts says the share issue could value the company at between $15 billion (£8.8 billion) and $20 billion.

Google executives agree with this rough valuation, although they plan to issue only 10 to 15 per cent of its shares, raising about $2 billion.

Google's founders, Sergey Brin and Larry Page, are believed to favour a so-called Dutch auction in which shares would be offered

direct to the public rather than through the usual system by Wall Street banks.

This would, among other things, give the company some distance from the increasingly scandal-plagued financial services sector.