According to the Wall Street Journal, Google is potentially interested in helping private equity firms buy a stake or all of Yahoo. The article says:
Google and prospective partners have held early-stage discussions but haven't put together a formal proposal and Google may end up not pursuing a bid, this person said. It is unclear which private-equity firms Google has talked to.
But at the same time, there are rumors of Microsoft also looking to buy Yahoo. Yes, these are the same types of rumors we had years ago, prior to Carol Bartz giving Yahoo away to Microsoft. But now, things may be different.
Yahoo's co-founder is also saying that Yahoo is not for sale - a lot of these rumors may be true or may be just out there to generate interest in larger bids for Yahoo.
Greg Sterling's take is that Yahoo is a pawn in all of this:
Any deal involving Google will be subject to close federal review. However that’s less likely with Microsoft in the scenario described above. Regardless of who winds of owning Yahoo, it will take vision and inspired leadership (not merely competent management) to reverse the long, slow decline that has taken hold at the company.
No one really can see Google being allowed to buy Yahoo but let's see what happens.
Forum discussion at WebmasterWorld.