With this launch, Microsoft will throw itself into open competition with established giants like Google and Yahoo.

Analysts say that the move could be a setback to its competitors as the service would be incorporated in Microsoft's Internet Explorer browser, which sells as an integral part of the Windows platform that equips 90 per cent of personal computers sold around the world.

The company, which has been working on the search engine for the past 18 months is eyeing a larger share of revenue by combining Internet search and advertising.

A preview version of the service to be launched on Thursday, is in response to Google's expected launch of free instant messaging and other services that broaden the areas it searches to include data on PCs according to analysts quoted by WSJ.

Microsoft is also expected to have a PC search tool, by year-end, WSJ said.

Analysts say that Microsoft's move into search services is significant, but the company lags behind Google and Yahoo in terms of consumer perceptions about search. It will be an uphill battle for the company, analysts added.

Microsoft, which was slow to realise the magnitude of the Internet revolution, is now prepared to use its multi-billion-dollar treasure chest to quickly get all it needs to catch up, the report added.