Microsoft is conducting internal tests of a new online search tool, signalling renewed attempts by the software giant to challenge both Google and Yahoo’s search engines in the coming months.

The new version of Microsoft’s online search service has been codenamed kumo.com, and a company spokesman has confirmed that it is being tested internally by employees.

The existence of the new service came to light in an internal memo sent by the head of research at the company's online services division on Monday. It did not provide details about the new features.

"Kumo.com exists only inside the corporate network, and in order to get enough feedback we will be redirecting internal live.com traffic over to the test site in the coming days," said the memo from Satya Nadella. "Kumo is the codename we have chosen for the internal test."

It is unclear whether “kumo” - which means both cloud and spider in Japanese – will be the final name given to the new search tool. There have been reports for months that Microsoft is considering a significant rebranding to its search business, currently named “Live Search".

Microsoft has for years been struggling to catch up with the runaway leaders in the online search market, Google. In the US search market, Microsoft comes third with 8.5 per cent of all searches; trailing behind Google on 63 per cent and Yahoo's 21 per cent. Worldwide, Google’s lead is even bigger.

In recent months, the world’s largest search engine has slowly begun to encroach on Microsoft’s core software business, launching Google Android, an operating system for mobile phones, and Chrome, a new web browser to challenge Microsoft’s dominant Internet Explorer.

Last year, Microsoft made an unsuccessful attempt to buy Yahoo for $47.5 billion. Executives at both companies have left open the possibility of a deal or partnership involving only Yahoo's search business.

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