In my "3 Reasons to Believe in Yahoo!" article last week, I should have added a fourth point: Microsoft (NASDAQ:MSFT) will never really go away.

Shares of Yahoo! (NASDAQ:YHOO) had a wild run yesterday, hitting fresh post-Microhoo lows before running higher after reports of a new hookup with Microsoft surfaced.

Let's cut to the videotape.

  • Kara Swisher put out a timely article -- "Yahoo!'s Dangerous Stock Dip (Hey, Microsoft, Don't Blow It!)" -- three hours into the trading day. There was no mention of Microhoo talks starting up again. Swisher simply connected the dots of Yahoo!'s stock nearing the high teens when an advantageous Microsoft jumped into the fray back in January.
  • An hour later, CNET updated an article, claiming that Microsoft and Yahoo! were back in talks for a deal that would include only Yahoo!'s search business.
  • Then came TechCrunch, leaning on unnamed sources from both camps, indicating that the deal is for all of Yahoo!. Quite notably, the price of the deal will be below the offer that Yahoo! refused earlier this year.

What does this all mean? A lot less than you may think. Right now, there are many disgruntled Yahoo! investors. Even those who may have recoiled at selling out to Microsoft are starting to realize that the grass was greener on Mr. Softy's side. Uncertainties over Yahoo! becoming the latest AdSense partner in Google's (NASDAQ:GOOG) popular monetization program for third-party publishers aren't helping.

Unfortunately, we can't wipe out months of brand-tarnishing events. Yahoo! has gone from announcing layoffs in February to the defection of dozens of executives on their own after making the cut, including the leaders at some of the company's most vibrant properties, like Flickr and The combination of Yahoo! and Microsoft grows less relevant relative to Google's insurmountable market share advantage with every passing month.

Then you get to the crux of the problem with Microsoft's alleged renewed interest. If Microsoft succeeds in only buying the company's search -- the only thing it truly wants -- where does that leave Yahoo!? Yes, Yahoo! will get some sweet cash for that, but if the company's online empire becomes little more than a hotbed of traffic with no search, doesn't it become just as devalued as Time Warner's (NYSE:TWX) AOL? And now that many of Yahoo!'s few stars are bailing, what is Microsoft buying, exactly?

This is not the way that anyone wanted things to go down. The rumored deal revival is fatiguing. Man, I hope this is the last time I have to use the word "Microhoo."

Sadly, it probably won't be.  

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