Google is considering providing financing for an acquisition of Yahoo! Inc by another company or a group of bidders, according to a source.
The company may opt not to take part in an offer and has not engaged in serious discussions with potential partners, said the source.
Google, which is under regulatory scrutiny from governments around the world, may lend its financial support to preserve Yahoo as a rival and bolster competition in the Internet industry, according to Greg Sterling, an analyst at US-based Opus Research.
Sterling said: "If competition is diminished or marginalized, then all the arguments about Google being a monopoly ring more true."
Google, which has US$42.6 billion in cash and short-term investments, is considering helping to finance other bidders, rather than trying to acquire Yahoo outright, the source said.
The US Federal Trade Commission has begun a review of Google's business practices, including search and advertising. The European Union and the state of Texas have also begun investigations into the company's leadership in search and advertising markets.
Potential financing by Google for a bid for rival Yahoo has parallels with the US$150 million investment Microsoft made in competitor Apple in 1997 to help preserve competition in the computer market, Sterling said.
Nonetheless, regulators might scrutinize any Yahoo acquisition that involves Google. The US government threatened to challenge an earlier proposal by Google to place ads on Yahoo's site, causing Google to abandon the move in 2008.
A growing roster of private equity firms is considering whether to pursue Yahoo, which has a market value of US$20 billion. Microsoft is considering providing financing, according to sources.
A potential investment by Microsoft, a longtime Google rival, may also have prompted Google's interest in a financing deal involving Yahoo, Sterling said.
Alibaba, whose largest shareholder is Yahoo, has said it is "very interested" in facilitating the Chinese company buying back its 43 percent stake.
Private equity companies Kohlberg Kravis Roberts and Blackstone are among firms considering an offer for Yahoo, sources said. Alibaba has discussed a plan with Silver Lake Partners and Russia's Digital Sky Technologies to make a joint bid, according to sources. Another group apparently interested in an offer includes Providence Equity Partners and former News Corporation executive Peter Chernin.
Google advertising customers are able to buy space on Yahoo sites through Google's Invite Media service, according to a source.
