"I want to merge Yahoo! with eBay," Jim Cramer told viewers of his Mad Money show last night. It was his plea to make "two quickly declining companies come together to form something worth owning."
And just that like that -- snap -- it happened!
OK, so it didn't really happen. Cramer isn't that powerful. In this particular case, he isn't even all that original. Rumors of Yahoo! (NASDAQ:YHOO) and eBay (NASDAQ:EBAY) hooking up have been making the rounds for more than seven years.
However, while the dot-com bubble chatter was all about two speedy giants getting together to grow even faster, the urge to merge these days is about two drunken stalwarts trying to stay standing by holding each other up.
A more sobering assessment
eBay and Yahoo! are still growing. That's true. However, it's octane with asterisks. The fastest pieces of the eBay engine have been acquired over the years. Organic gains in its bread-and-butter domestic auctioning have been meager. The company saw the number of listings inch just 2% higher this past quarter. eBay Store listings actually dipped on a year-over-year basis.
The definition of growth gets a bit murkier at Yahoo!, where the search engine giant saw operating profits dip by 16% on a 9% top-line uptick this past quarter. Google (NASDAQ:GOOG) keeps growing at the company's expense. Yahoo! is in the process of making its paid search platform a truer clone of Google's successful performance-based bidding system, but the early indications weren't exactly positive. Yahoo!'s recent rolling out of its Panama platform in Europe hints at improvement, but now the company has to deal with yesterday's resignation of its CTO, Farzad Nazem.
So why is Cramer so bent on playing matchmaker between two struggling giants? It's because the pieces fit all too well. The two greatest overseas failures for eBay's auction business have come in Japan and China. The sites that mopped the floor with eBay -- Yahoo! Japan in Japan and Taobao in China -- have Yahoo! as a minority investor.
Think about how voice chat giant Skype would help Yahoo!'s IM base. Just imagine eBay's PayPal going batty all over Yahoo!'s premium dating, employment, and merchant areas. How about the nice fit between Yahoo! Sports and eBay's StubHub?
Conspiracy theorists may even argue that Yahoo! is retiring its own stateside auction site next week as a peace offering to eBay. It's a ludicrous notion, but who says that rumor mills are powered by sane assumptions?
Father of the runaway bride
Cramer's charity trust owns a piece of Yahoo!, but this is more than a nervous daddy trying to marry off his plain daughter. Last year he suggested five smaller companies that Yahoo! should acquire. That list included two companies -- The Knot (NASDAQ:KNOT) and Bankrate (NASDAQ:RATE) -- that have been big winners in the Rule Breakers growth stock newsletter service.
So Cramer doesn't seem to care if Yahoo! is the bride or the groom at this point. He just doesn't want to see the company wither away holding the Old Maid card.
The resignation of CTO Nazem stings, especially after the managerial reshuffling that took place back in December and the critical Peanut Butter Manifesto that made the rounds a month earlier. Then again, given the company's recent rut, Sue Decker -- who moved from CFO to head of the company's advertiser and publisher group -- may be the only executive still donning a shiny halo at Yahoo! these days.
Retaining key talent and attracting seasoned stars isn't easy when you're in a funk. Stock-based compensation isn't much of an incentive when the shares are meandering. The media also loves to pile on when you're down, leaving potential hires reluctant to take chances on their resumes.
It's not much rosier over at eBay, bringing us back to the dreamy nuptials that are unlikely to happen. A merger would light a fire under both stocks, but each company may be too proud to realize that it needs the other to be truly happy.
The union makes perfect sense, but this is the wedding that Cramer will never see.
Yahoo! and eBay are Stock Advisor recommendations. The Knot and Bankrate are Rule Breakers newsletter service picks. Whether you would address congratulations to eHoo! or YaBay, you're the right type to try a free 30-day trial subscription to either stock research service.
Longtime Fool contributor Rick Munarriz isn't sure which side of the chapel he would sit in if he were invited to this unlikely wedding. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.
