Yahoo! Could Still Slip Into The Arms of Microsoft? (YHOO, MSFT, AOL, GOOG)

Reading news stories about the next possible buyer for Yahoo! Inc. (NASDAQ: YHOO) resembles nothing so much as a game of Whack-a-Mole. First there was Microsoft Corp. (NASDAQ: MSFT) back a few years ago, with an offer of $31/share (about $44 billion) in 2008. Yahoo declined, but later did a search deal with Microsoft that gave the Redmond-based company pretty much what it wanted in the first place.

Then AOL Inc. (NYSE: AOL) entered the fray in 2010 as possible merger candidate, only to have that story evaporate. There was even talk that Microsoft or Google, Inc. (NASDAQ: GOOG) would make a bid for AOL. Didn’t happen.

AOL popped back up just last month as a possible buyer for Yahoo, but that didn’t last too long either. Today, Reuters has an exclusive report that Microsoft is re-emerging as a possible buyer for Yahoo.

The reason the Reuters story is an exclusive is probably because a Microsoft/Yahoo tie-up now doesn’t make any more sense than it did one, two, or three years ago. Microsoft would have to be crazy to pay Yahoo’s current $18 billion market cap, when China’s Alibaba could tear off more than half that by re-claiming the 40% of Alibaba that Yahoo currently owns. There’s virtually no chance that Alibaba will let Microsoft — or anyone else — keep that big a stake in the Chinese firm.

Yahoo’s shares have jumped another 9% today, to $15.78, in a 52-week range of $11.09-$18.84. Whack!

Paul Ausick