I wondered about this deal a while back when Microsoft (NASDAQ:MSFT) first announced their intention to acquire Yahoo (NASDAQ:YHOO).  I thought it was an absurd thing to do for Microsoft.  Now, rumors are starting to circulate that Microsoft might pull out.  And the other interested parties have left the building.

If this happens, Yahoo is pretty much toast.  Most of their top talent has already bolted when this was first floated, and they weren't the most innovative company in the world to begin with.  The only thing they've done recently that I've really liked is Yahoo Pipes (which is one of those geeky tech toys that I have NO idea how they would generate revenue from).  I've used Yahoo Messenger for instant messaging for years, but aside from that I really don't care about the company.  They are, for the most part, irrelevant in this day and age.  On top of that, their best talent left, management bungled the potential acquisition, morale is non-existant, and it generally sounds like a depressing place to be right now.

The ONLY thing they have going for them is that they have a lot of home page eyeballs.  Their My Yahoo! site is pretty popular, and yahoo.com still gets an insane amount of traffic.  They're basically a content producer at this point, and Microsoft wants to own that space badly.  And Microsoft has now managed to severely cripple its biggest competitor in this market.  Now, I obviously don't know if this was the plan all along or not, but I do know that blowing billions of dollars on Yahoo right now would be an absurd waste of money in the current economic environment.  They will never make that money back on the deal if it happens.  If Microsoft was really willing to give up that kind of money they will be extraordinarily fortunate if the deal DOES fall thru, because they were just saved from their own stupidity.

If Microsoft's first offer was serious, Jerry Yang is playing some dangerous poker here.  If I were a shareholder I would seriously consider slapping him upside the head and asking him what he was thinking.  In my opinion he looked a gift horse in the mouth.  Stared it down, in fact.

Was thinking about buying some YHOO puts for just this event the other day, now it looks like I may be too late.  We'll see what happens over the weekend, if the price opens at a decent level I may just have to play in this one.