Watching Microsoft (NASDAQ:MSFT) and Yahoo! (NASDAQ:YHOO) is a lot like watching When Harry Met Sally. You know they're made for one another, but they're going to play up the drama until they finally hook up for keeps.
The latest Microhoo rumor -- and it comes from BoomTown's Kara Swisher, who has a better batting average than the hearsay peddlers below the Mendoza line -- claims that both companies are still talking about a search and advertising partnership.
Now, before you begin shaking your head, this isn't the ridiculous chatter that finds Yahoo! accepting gobs of money to hand over its precious real estate to Mr. Softy's grubby hands.
No, the more realistic turn finds Yahoo! selling the juicy search and display advertising across both companies. Microsoft would be the tech brains behind the engines, and possibly invest in Yahoo!
Finally! We have a Microhoo deal that makes sense. There was little reason for Yahoo! to just hand over its search to Microsoft. It may as well sell itself whole. However, the new kind of deal would let the larger online market of the two -- Yahoo! -- get even bigger, with Microsoft having some serious skin in the game.
Microsoft on Yahoo!'s shoulders isn't enough to take on Google (NASDAQ:GOOG), but it's a more attractive competitor than either one can be on their own or through smaller acquisitions like Time Warner's (NYSE:TWX) AOL or IAC's (NASDAQ:IACI) Ask.com.
Microsoft continues to lose money online, and it needs to scale quickly. Yahoo! is squarely profitable, but investors are hungry for results since the company rebuffed Microsoft's buyout bid last year. Every day that passes without a win-win deal simply delays the inevitable and makes the competition that much stronger.
Or, in the words of When Harry Met Sally's Harry Burns:
"I came here tonight because when you realize you want to spend the rest of your life with somebody, you want the rest of your life to start as soon as possible."
The world according to Microsoft:
- The software giant has been cutting prices lately.
- The Microhoo chatter won't die until they do it.
- The Best Company I've Ever Seen
