Armstrong is discussing options for a combination aimed at strengthening the two Internet companies, Bloomberg quoted two people who are familiar with the matter as saying.

　　The report said that the AOL CEO had been interested in a merger with Yahoo last year but was rejected while Carol Bartz served as Yahoo CEO, who was ousted by Yahoo's board on Tuesday.

　　Reconsidering the option after Bartz's departure, Armstrong has talked with private equity firms and investment bankers from Allen & Co. working with Yahoo.

　　Under one scenario being considered, Yahoo would acquire AOL and Armstrong would become CEO of the combined company, said the source.

　　Both Yahoo and AOL are suffering from declining revenues, struggling to compete against companies like Google and Facebook. Some analysts said that the merger could not provide a long-term solution to the problems the two companies face after they failed to keep up with Internet trends.