A proposal on the table late Thursday called for Yahoo to buy Beijing-based 3721 Network Software for about $120 million in cash and stock, the source said. If the purchase goes through, Yahoo will add a business for selling domain names in China, while also maintaining a beachhead in what's considered a rapidly growing market for Internet companies.
The source said the deal is not yet final, however, meaning that it could yet change or fall through.
A Yahoo representative declined to comment on the negotiations.
3721's business entails selling Chinese-language keywords for Roman alphabet domain names, in hopes of letting local Internet users find Web sites easier, according to the company's Web site. That means that a Chinese company can maintain its brand when local Web users either search for the company or type in the company's Web address.
The company charges $115 a year for "specific" keywords, such as company and product names. "Generic" keywords, such as categories or broad industry names, cost $1,300 a year, according to the Web site.
Web users can download browser software to accept Chinese-language keyword inputs. Chinese language Web portals also support 3721 keywords, the Web site said.
The negotiations between Yahoo and 3721 come as the Internet Corporation for Assigned Names and Numbers, the Net's supervising body, is studying whether to add suffixes to its domain name database. People can surf the Web using different languages, but site addresses must currently end in a Roman-language suffix such as .com or .org.