With Ireland host to major European operations for all three companies, the result could be a mini-war for talent as competition in that sector heats up, at least for those with specialist skills.

However, a merger could mean that some of the 400 Irish Yahoo jobs by 2010 announced two years ago may not materialise.

Buying Yahoo for a reported $50bn would allow Microsoft to begin addressing the long-term mortal threat posed by upstart Google, but it would still have an uphill battle.

The combination would have 27% of the market for paid search, compared with 65% for Google.

Forrester Research analyst Charlotte Li, writing on a blog, warned that even buying Yahoo, with its Web 2.0 properties del. icio. us and Flickr, would not be enough to pull even with Google straightaway.

"In the very long term ( three years plus), there's a chance that a revitalized company would be in a better position to compete, but this assumes that Google stands still for them to catch up, " Li wrote.

Other analysts favoured the match, pointing out that Microsoft wouldn't be able to start catching up with Google without a major acquisition.