Microsoft has approached search engine success story Google to discuss a potential buy-out of the company.

California-based Google survived the dotcom revaluation to emerge as a Silicon Valley success story. The company has been meeting with investment bankers for the last few months to explore what options exist for a public offering.

The New York Times claims Microsoft approached Google to discuss alliance options, including a takeover, at that time.

Google hasn't been rushing to take up Microsoft's offer. Google executives seem to prefer an initial public offering to an acquisition, the newspaper said. Microsoft and Google have so far declined to comment.

Google hopes to sell a ten to 15 per cent stake to the public – worth $2 billion in investment cash.

Microsoft is eying the Web-search market now largely dominated by the five-year-old Google. While Microsoft has denied plans to enter the paid search industry, it has increased the staff on its search team to more than 200 and declared MSN Search one of the company's key businesses.