Yahoo/eBay Merger Case Strengthened By Semel Departure

Includes: AABA, EBAY
by: Tim Poulus

I believe all the turmoil around Yahoo! (YHOO) following CEO Terry Semel's resignation fortifies the case for a merger with eBay (NASDAQ:EBAY), which I defended before.

Keep in mind that Google (NASDAQ:GOOG) is the perennial enemy to both. Microsoft (NASDAQ:MSFT) on the other hand is carefully treated as an equally beleaguered colleague, rather than as a competitor.

The recent animosities by no means endanger a Yahoo!/eBay merger:

  • Google was ready to invade eBay's Live event, which made eBay pull away from AdWords. Instead, eBay could be a bigger Yahoo! partner.
  • Google attacked Microsoft over Vista's desktop search. The case was settled.
  • Nor do the recent advances, quite to the contrary:

  • Yahoo!'s problems keep any merger speculation alive, particularly with Microsoft.
  • Now the Times of London reports that News Corp (NASDAQ:NWS) floated the idea of swapping MySpace for a 30% Yahoo! stake. I believe the implied MySpace valuation must be too high for Yahoo!, which proved quite frugal when approaching Facebook. Also, I believe that Yahoo! needs to be a 'content neutral' aggregator, not a News Corp vehicle.
  • However, the eBay/MySpace talks are still ongoing.
  • Yahoo! has not responded to Ron Burkle's attempt to involve Yahoo! in a counter offer for Dow Jones, News Corp's much desired prey.
  • In other words, I think Yahoo! is carefully aiming for eBay. At the same time, News Corp must be kept at an arm's length.

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