Microsoft may buy Yahoo and AOL if the latter two merge


Microsoft is quietly readying a plan to make a purchase of the combined Yahoo-AOL, should Yahoo pull off its plans to acquire the struggling America Online unit, according to sources close to AOL — via the menage-a-trois with AOL.

Microsoft was rebuffed earlier this year when it tried on multiple occasions to buy Yahoo. However, the odds are growing that a chain of events could lead to the Microsoft-Yahoo marriage after all.

Spokespeople at Microsoft and Yahoo declined to comment. A spokeswoman at AOL did not return a phone call and email.

But here’s why it makes sense. Increasingly, word is that Google is going to have trouble upholding its advertising deal with Yahoo, because anti-trust regulators are concerned about the market dominance the deal gives to Google and there’s a very strong chance they’ll reject it. A decision could be made by the Justice Department next week. If that happens, Yahoo’s stock will take a massive hit: One reason Yahoo’s stock is as high as $19 is because of the extra revenues it says it’s getting from the Google deal. Yahoo’s stock could plunge to say, $15, if the Google deal gets rejected. That’s because investors will turn even more bearish on a company that seems strategically adrift.

That would make Yahoo even more desperate to do a deal with another company. While Yahoo’s founder and CEO Jerry Yang has made it clear he does not want to merge with Microsoft, it’s obvious a deal with AOL is more palatable. Indeed, Yahoo’s new board of directors has initiated more talks with Time Warner over a possible merger with its America Online unit, something we confirmed last night. And investor Carl Icahn, now on Yahoo’s board, has been very vocal about Yahoo needing to do a deal. Moreover, AOL appears more desperate than ever to do a deal. Its business has continued to deteriorate. Time Warner said AOL’s ad revenues declined 16 percent to $1.1 billion in the most recent quarter, compared to the same quarter in 2007. So the odds of a Yahoo-AOL deal going through have gone up significantly over the past couple of weeks.
And with Microsoft desperate to do a deal — it wants to compete with Google in online advertising — there’s nothing stopping it from bidding to take over an even more attractive duo of Yahoo-AOL.

Source Venturebeat
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