Following the rejection by Yahoo of its $47bn takeover offer, Microsoft is rumoured to be acquiring search startup Powerset.

According to the Venture Beat blog, a deal has been struck between the two companies, with the price expected to be around $100m.

Powerset is a much hyped search engine which uses semantic search technology which allows users to search using simple phrases, and questions as well as keywords. In theory, this makes the searches more accurate than normal keyword search.

Despite the hype and the $100m valuation, Powerset has only launched a limited version of its search engine up to now. This beta version only indexes results from Wikipedia, and the company has yet to prove that its approach works.

The price tag on the deal may be less than Powerset’s investors were hoping for, after the company was valued at $42m after a first round of funding in 2006.

Microsoft will be hoping that the acquisition will help to company to gain an edge on Google and its other rivals in the search market.

Microsoft’s Steve Ballmer said last week that search is a priority for the company:
“We don’t have to dominate, but we’d better have a darn good chunk of the search market over time, and we’re working away at it.”