Next Stop: AOLHoo

Now that Microsoft (Nasdaq: MSFT  ) is repurchasing its way out of the Yahoo! (Nasdaq: YHOO  ) sweepstakes and a revenue-sharing deal with Google (Nasdaq: GOOG  ) is attracting regulatory friction, is Time Warner's (NYSE: TWX  ) AOL the ticket to salvation?

This morning's Financial Times reports that yesterday's Yahoo! board meeting -- the first of the Carl Icahn era -- wrapped up with the board approving a new round of negotiation talks with AOL.

Is AOL even interested? Would this be an actual acquisition or just a partnership? Can one stagnant dot-com giant save another?

The answers are forthcoming, but this is a healthy indicator that Yahoo!'s board senses the urgent mandate for shaking things up.

You’d better believe it. Chairman Roy Bostock and CEO Jerry Yang barely kept their board seats after last month's contested proxy vote. There is no way that Yahoo! can face its shareholders again in its present form, with its present share price.

A potential hookup with AOL could get hairy, especially if antitrust regulators decide that Yahoo! can't outsource its paid-search space to Google. Since AOL is already serving up Google ads -- Google actually owns a small stake in AOL -- Time Warner's online arm would be less valuable if it had to give up its ability to monetize its page views through Google.

Another possible derailment comes in the lack of sexiness. Having two graying laggards join forces isn't going to excite shareholders. Yahoo! is better served gunning for smaller players with attractive core competencies, such as ValueClick (Nasdaq: VLCK  ) , in display advertising, or Bankrate.com (Nasdaq: RATE  ) , with its lucrative lead-generating audience.

Yahoo! with AOL? Yawn. Yahoo! on the move because it realizes it can't win Mr. Market's fancy organically? That's the real eye-opener.

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