Written By Kate Zimmermann | May 4, 2007 | Share This |

Once again, Microsoft and Yahoo are spinning rumors about a potential merger. Reports the New York Post,

“Stung by the loss of Internet advertising firm DoubleClick to Google last month, Microsoft has intensified its pursuit of a deal with Yahoo!, asking the company to re-enter formal negotiations. While Microsoft and Yahoo! have held informal deal talks over the years, sources say the latest approach signals an urgency on Microsoft’s part that has up until now been lacking…Part of the reason for that is because Google keeps trumping Microsoft on the deal front, beating out the company on not just DoubleClick, but also for a renewed search advertising pact with AOL in 2005 that Microsoft lusted after.”

Last May (exactly a year and a day, in fact) similar rumors surfaced when Microsoft expressed interest in purchasing an equity stake in Yahoo. The offer was firmly rejected, however, by Terry Semel. Now Microsoft is back with a $50 Billion offer, according to the Post, which is well above Yahoo’s $38B market cap. With Semel’s career on edge (thanks to Yahoo’s waning performance), selling to Microsoft could be an easy out. Many analysts note that Microsoft and Yahoo have complimenting strengths that together would help close the divide between Google and the rest of the search industry.

Both Microsoft and Yahoo have seen waning performance beside Google’s continued growth - could the two together create a legitimate competitor? Besides the raw differences in company organization and approach, a merger would likely come under antitrust scrutiny.

Regardless of the likelihood of a Microsoft/Yahoo conglomerate, Yahoo’s stock is already up 18% since this morning.

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