Microsoft and Yahoo

Both in the mainstream TV news and online there seems to be a lot more noise than signal about the Yahoo Microsoft merger situation. I still think that Microsoft plans to acquire Yahoo and that they will find a way to make it happen over the next few months.

This view seems to put me in the minority because many are saying the deal is "dead". That is technically true of course - Microsoft withdrew their offer yesterday - but Ballmer's letter made it very clear that he was still open to a sale, and I think a quick read between the lines suggests he is trying to set up Jerry Yang for a hard fall. Without help from Google it'll be tough for Yang to keep his post after spearheading the effort that will effectively revalue the stock from Microsoft's top offer of $33 to tomorrow's open which is likely to be in the low $20's.

Techcrunch is reporting that the valley rumor mill suggests Yahoo is trying to get a Google deal announced before tomorrow's opening to avoid a major Yahoo selloff, and given the very favorable view of Yahoo from top Googlers Page, Brin, and Schmidt and their mutual distate for all things Microsoft I think this deal is probably going to happen, though I also think it will not do much to immediately prop up Yahoo's stock price which is likely to go down $5-$8 at tomorrow's open and possibly even more if frustrated investors decide it's time to give up on the company.

Disclosure: Long on YHOO