The future of Sunnyvale, Calif.-based Yahoo! was thrown into doubt last month when the company told employees it had retained Allen & Co. to help consider strategic options. The disclosure came weeks after the company unceremoniously fired CEO Carol Bartz.

There has been no shortage of speculation about who might be interested in buying Yahoo!. The company's shares spiked Monday, Oct. 3, after Jack Ma, CEO of Chinese Internet giant Alibaba Group Holding Ltd., said he was interested in buying the struggling company. Yahoo! owns 40% of Alibaba.

Yahoo! would be "better off in the hands of Microsoft than a private equity shop" such as Silver Lake, said Habib Kairouz, managing partner of Rho Capital Partners, in an interview. "Microsoft has been working with the company and having these dialogues for years at this point, and they have some assets that could complement their assets. The home page and some content areas within Yahoo! could be key for Microsoft, and I think they understand that business better than anybody."

Microsoft, which has been rumored as a potential suitor on various tech blogs for weeks, would be interested in combining Yahoo! with its MSN Web portal. Reuters reported Thursday that there is an internal debate inside Microsoft about whether to bid, adding that the company joins Providence Equity Partners, Hellman & Friedman LLC, Silver Lake and Russian tech investor DST Global among possible buyers or investors.

Shares of Yahoo! traded at $15.92 apiece on Wednesday and any offer would be well below the $33 per share Microsoft offered in 2008. Microsoft's interest has likely diminished since it's already gained an exclusive licensing agreement for Yahoo!'s core search technology.

Reuters said deal advocates inside Microsoft believe the combined MSN-Yahoo! would obliterate AOL Inc. and create a strong portal, while skeptics would rather see the money invested in areas with better growth potential.

Yahoo! is said to be pursuing a dual-track of listening to interested buyers while also seeking out a new CEO. Private equity buyers would likely seek to sell Yahoo!'s Asian assets, which include the Alibaba stake and a 35% ownership of Yahoo! Japan, and try to rebuild the company's U.S. operations.

-- Mary Kathleen Flynn contributed to this report.