The world's largest software company Microsoft and media giant Time Warner are in talks about how the two US firms can work more closely together.
Firms want to entice users by offering the most complete product
Press reports claim the talks focus on two areas - the first could see Time Warner's AOL replace its current search engine Google with Microsoft's product.
Secondly, they speculate that Microsoft is keen to buy part of AOL and merge it with its own internet business.
The two have declined to comment and a deal is not thought to be imminent.
However, that has not stopped investors pushing Time Warner's share price higher on optimism that some sort of deal will eventually take place.
According to the reports - which have run in publications including the Wall Street Journal and the New York Post and been attributed to unidentified sources - the talks started two years ago.
A driving force behind the move is thought to be Time Warner's poor share price performance over the past five years and increasing pressure on chief executive Richard Parsons to shake things up.
Time Warner has seen 70% knocked off the value of its stock over the past five years and investors, including billionaire corporate raider Carl Icahn, have been turning up the heat on the firm's management.
Mr Icahn has said he will seek to get shareholder-approved executives appointed to the management board in order to force through changes such as a $20bn share buyback programme.
Striking a deal with Microsoft may help silence many of Time Warner's critics, analysts said.
According to the sources, Microsoft and Time Warner are examining how they could work together in developing their online advertising, instant messaging and search engine businesses.
Analysts said that a collaboration might make sense.
Plans to develop AOL have had a mixed reaction from analysts
While Time Warner's AOL is the market leader in instant messaging, it has been losing subscribers at its internet service.
Microsoft, meanwhile, would be interested in gaining access to AOL's instant message user-base.
Replacing Google as AOL's search engine provider also would allow Microsoft to increase its profile and benefit from the sale of adverts that appear next to search results.
Despite the rise in Time Warner's share price, the reaction to the rumours has not been all positive.
Many analysts have questioned why Time Warner would want to increase its internet presence when its main business is providing media content.
At the same time, they point to the fact that Microsoft and Time Warner have not always enjoyed the best of relationships.
In 2003, Microsoft had to pay Time Warner $750m after it was found to have used anti-competition measures in its battle to promote its internet Explorer software.