The deal could help Microsoft in the wake of its failed Yahoo bid, although sources say Microsoft is also mulling over whether to offer a new bid for Yahoo’s search engine, amid urging from Yahoo shareholders.
Rumors that Microsoft was interested in Powerset have been swirling for weeks.
VentureBeat said the deal for the Silicon Valley company, which specializes in semantic, or natural-language search, is due to be announced next month.
Microsoft and Powerset both declined to comment on the report.
Microsoft is close to buying search engine Powerset for $100 million or more, according to technology Web site VentureBeat.
In November 2006, Powerset said it had landed $12.5 million in Series A funding from Foundation Capital, Founders Fund, and angel investors.