By DPA,

New York : A mammoth deal that would reshape the internet landscape loomed closer Friday after Microsoft reportedly raised its bid for leading web portal Yahoo.

The New York Times reported that Microsoft had raised its offer by several dollars, after weeks in which the companies had been at a tense standoff. The report called the offer an "enormous breakthrough”.

The Wall Street Journal reported meanwhile that executives from the two companies had intensified talks on the deal. But despite the encouraging signs, both reports quoted sources familiar with the negotiations as saying that the talks could falter or even collapse altogether.

The intensified talks came a day after the Microsoft board gave company CEO Steve Ballmer broad authority to decide on how to proceed with the takeover attempt of Yahoo.

Microsoft wants to buy the web portal to stiffen its competition with Google for internet advertising and software. But Yahoo has consistently rejected its $31-a-share offer, with many shareholders indicating they will sell only for $35 a share. Microsoft is believed to be willing to offer $33 a share.

Earlier reports said that Microsoft was leaning towards launching a hostile takeover bid for Yahoo, even though this could cause a long delay in developing strategic initiatives for both companies and prompt many of Yahoo's most valuable employees to leave.

A deadline set by Microsoft for Yahoo to accept its $41.9-billion passed Saturday with no further comment from Yahoo, which had originally dismissed the bid as undervaluing the company, even though it represented a premium of 62 percent on the company's pre-offer share price.

If the deal goes through it would easily be the largest in Microsoft's history and would reshape the Internet landscape by giving Microsoft direct access to Yahoo's estimated 500 million users.

Friday's reports coincided with the news that Yahoo and Google were close to reaching an advertising partnership which would see Google's ads appearing on Yahoo sites. The move could boost Yahoo's revenues by approximately $1 billion annually since Google's ads have higher click-through rates than Yahoo's.

However the move could face regulatory hurdles.