But with a market cap of $33 billion (minus $2 billion in cash) that doesn’t leave many potential buyers with enough market cap to swallow Yahoo. All the buyers/partners that are big enough, like Microsoft (NASDAQ:MSFT) and Google (NASDAQ:GOOG), are already competing with Yahoo, so they aren't really buyers. I think the sale could happen, but at a lower price. A potential sale/merger puts a floor on the stock, but I don’t think it provides much upside.
Disclosure: I am long YHOO and MSFT. I am short 25 and 35 strike calls on YHOO.