Yahoo Stock Jumps on AOL Buyout Rumors

The timing couldn't be worse. Just as the stock market buzz of a Yahoo takeover set Yahoo stock percolating, the news starts to spread of a Yahoo outage which KOd the site today for an unknown number of users. People who watched the recent film, "The Social Network," may remember the apoplexy which afflicted Mark Zuckerberg one day when the future Facebook company he helped found flaked out for a couple of hours.

The most notable name mentioned regarding the purchase of Yahoo is AOL, another company struggling to survive against dominant Google . Google gets more than 80 percent of online advertising and had undergone phenomenal development. The difference is notable in the stock price of the three companies:

Google stock (GOOG) trades right now at $589.90 per share; Yahoo (YHOO) is up to $16.09 from a low of $14.00 earlier in the week; AOL is slightly higher on the day at around $25.00. The money-making opportunities in takeover bids are apparent. A guy, or maybe a girl, posted a comment on a Wall Street Journal article covering the story saying he/she bought an option on YHOO, expecting to sell at $20.00 per share in November. And those are the small players.

No one's talking to reporters about a possible deal at either company, and a possible deal could collapse just as well as not. In 2008, Yahoo resisted a takeover bid by Microsoft Corporation, and shareholders were not happy campers since Microsoft offered to pay $47.5 billion for Yahoo. On paper, Yahoo current market value is $22 billion but financial analysts say that management puts a higher price on the company-around $30 billion.

Most people here know that Yahoo recently bought Associated Content and that change has been largely beneficial. Such mergers often help both companies when one company, long on ideas but undercapitalized, receives financial support from another with plenty of potential and backstop cash. But AOL is struggling, and in spite of its higher stock price, doesn't have the brand name and panache it once had. Yahoo, too, has waned from its early domination of search, advertising, and aggregation but it's still a solid, well-defined company with the potential to recover some turf, so long as its not guided by struggling AOL

Linking up with AOL might appeal to Yahoo stockholders, but the combined Yahoo/AOL would be no stronger against giants like Google and Facebook. Should the deal go down, where will this leave Associated Content? In the lurch, most likely.