July 18 (Bloomberg) -- The chance Yahoo! Inc. will put itself up for sale has increased after the most-visited U.S. Web site lowered its revenue forecast, according to Stanford Group. Microsoft Corp. is a candidate to buy the company, analyst Clayton Moran said.

``Given a seemingly increasing disconnect between management commentary and operating results, a sale of Yahoo seems more likely,'' Stanford's Moran wrote in a note to clients. ``In the near-term, we believe this stock will linger in the mid-$20s, unless a suitor arises.''

Shares of Sunnyvale, California-based Yahoo retreated to the lowest price since Jan. 3, losing $1.33 to $26.20 as of 4 p.m. in Nasdaq Stock Market composite trading. Their 4.8 percent drop was the most since April. They have slipped 19 percent in the past year, compared with a 39 percent gain in Standard & Poor's 500 Information Technology Index.

Yahoo is facing tougher competition as Google Inc. extended its lead in Internet search queries and new rivals took sales in display advertising, the company said when it reported second- quarter results after U.S. markets closed yesterday. The company forecast revenue for the rest of the year that trailed most analysts' estimates.

`Significant Challenger'

A Yahoo-Microsoft union ``could be a significant challenger to Google and could increase Microsoft's competitiveness,'' Moran said in an interview.

Microsoft and Yahoo have held talks about a partnership designed to boost their share of the Web search and advertising market and catch up with Google, people briefed on the discussions said in May.

Yahoo has ``dramatically underperformed'' Google, which has gained market share in Internet searches and increased its technological edge, Boca Raton, Florida-based Moran wrote. Yahoo is also losing advertising to News Corp.'s MySpace and Google's YouTube, he wrote. Yahoo's diminishing share of the search market has contributed to six straight quarters of declining profit and the slowest sales growth since 2001.

Yahoo brought in co-founder Jerry Yang as chief executive officer last month to help close the gap with Google.

Moran reduced his share-price estimate for Yahoo by 6.3 percent to $30. The analyst also cut his 2007 profit estimate by 8.7 percent to 42 cents a share and his 2008 forecast by 25 percent to 56 cents. He maintained his ``hold'' rating on the stock.

To contact the reporter on this story: Sarah Rabil in New York at srabil@bloomberg.net.

Last Updated: July 18, 2007 16:29 EDT