Time Warner and Microsoft have reportedly resumed discussions about forming an alliance of their internet operations.

The companies are exploring ways to combine MSN's search engine technology with AOL's web content, according to the Wall Street Journal.

There is no indication yet on whether AOL's 20.7 million internet dial-up customers and Microsoft's 2.7 million subscribers would be merged into one operation, the paper reported.

The companies originally began discussions earlier this year, but talks stalled in the late summer over a range of issues including questions about control, the Journal said.

The talks are being headed by Olaf Olafsson, executive vice president of Time Warner, and Henry Vigil, Microsoft's senior vice president.

The report comes just days after Google signed a deal with Sun Microsystems to cross-promote products, with Google's toolbar offered to users of Sun's popular Java code engine.

The accord was widely seen as a first step towards a collaboration that would offer internet-based consumer and office applications, posing a challenge Microsoft's suite of products.

AOL is Google's largest affiliate partner, providing search and ads for the internet service provider in the United States and Europe. AOL accounted for 11 per cent of gross revenue in the first half of 2005.

Analysts believe a combined AOL and MSN would allow Microsoft to distribute its search engine and related tools to AOL's users. It would also provide AOL a direct relationship with advertisers.

A British-based Microsoft spokeswoman said the company does not comment on "rumour and speculation".

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