A report in the 'Sunday Times' said that Microsoft Inc is in talks with Yahoo Inc to buy the US internet company's online search business for $20 billion is "total fiction," according to a key executive cited by an influential US blog.

The 'Sunday Times', which did not cite its sources, said the proposal under discussion involves a complex transaction that would see the US software giant support a new management team to take control of Yahoo.

The team would be led by ex-AOL Chairman and CEO Jonathan Miller and former Fox Interactive Media President Ross Levinsohn, the report said.

But the AllThingsDigital blog, affiliated with the 'Wall Street Journal', quoted Levinsohn as saying the report was "total fiction." Top sources at Yahoo and Microsoft also scoffed at the report, the blog said.

Yahoo spokesman Brad Williams said: "We don't comment on rumors, and all this is a rumor."

A Microsoft spokeswoman declined to comment.

Microsoft withdrew its $47.5 billion buyout offer for Yahoo in May after Yahoo Chief Executive Jerry Yang and his board rejected the bid as too low.

Bid speculation was sparked again earlier this month when Yang announced he was stepping down. Microsoft CEO Steve Ballmer ruled a bid out at the time, but said he was "open" to talks on a deal for Yahoo's search business.

Activist investor Carl Icahn -- who sits on Yahoo's board and increased his stake in the company to 5.4 per cent last week -- reiterated he favored the sale of the search business, according to an interview in the December 1 edition of Barron's.

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