Microsoft's $45 billion bid to acquire Yahoo takes dead aim at Google, one of the only companies capable of launching a counter offer with its own $20 billion-plus in cash reserves, and its ability to make immediate use of Yahoo's brand assets. But that doesn't mean other would-be suitors won't try to step in.

AT&T, General Electric and News Corp. all have the financial wherewithal and strategic imperative to pursue Yahoo's $12 billion core businesses and operations, assuming they might need or want to spin off a $12 billion minority stake in Yahoo Japan and Chinese search engine Alibaba. However, Microsoft indicates that it is prepared to launch and win a proxy fight for Yahoo. And it looks like Yahoo's so-called "poison pill" provisions for issuing discounted shares that would thwart a hostile takeover are essentially useless.

Indeed, Google and Yahoo have already begun hammering out of a partnership that would not only outsource Yahoo's search, but would have the companies work together in other key areas that could strengthen both their hands. Although Google is offering to assist Time Warner and others with a potential rival bid, it is not clear one will materialize.

Yahoo's only other recourse against a Microsoft takeover might be outsourcing its search to Google, which analysts say would boost its earnings by 25%. Google and Yahoo would fit together with far less overlapping properties than Microsoft. Google could top Microsoft's $31-a-share offer, and spin off Yahoo's minority stakes in Alibaba and Yahoo Japan to quell antitrust concerns or to satisfy change of control provisions in the joint venture agreements.

Google Sunday issued what sounded like a veiled call to action "as alternatives are explored." In a post on the Official Google Blog, David Drummond, Google senior vice president-corporate development and chief legal officer, said: "Microsoft's hostile bid for Yahoo raises troubling questions... could Microsoft extend unfair practices from browsers and operating systems to the Internet?" Could combining the Internet's two most heavily trafficked portals with Microsoft's PC software monopoly "limit the ability of consumers to freely access competitors' email, IM, and web-based services?"

The creation of a super class of portals--Google, and Microsoft-Yahoo --meanwhile makes AOL's $10 billion Web business (without its $3 billion Internet access business) an intriguing and manageable acquisition prospect for News Corp., Barry Diller's InterActiveCorp., AT&T, GE's NBC Universal or Comcast. There also is growing speculation that Google could leverage its 5% stake in AOL to spin it off in an initial public offering (IPO).

Lehman Brothers analyst Anthony DiClemente says AOL now will be forced to take some dramatic action, since it is unable to compete with the scale posed by Google and a combined Microsoft-Yahoo. "We think the deal leaves AOL in a strategic bind." Unless Google acquires it outright, "AOL is the odd man out," he said.

There is a wild-card chance that even as it is under siege, Yahoo could make a bid for AOL. Sources say AOL and Yahoo were discussing a possible collaboration before Microsoft made its preemptive strike on Friday. Yahoo also had talked about selling its media group to NBC Universal to concentrate on search and display advertising. In recent weeks, hedge funds and private equity firms have been emerging from the shadows to contemplate a Yahoo or AOL acquisition, although they would require a strategic media partner for the necessary synergies that reach beyond the funding. For instance, News Corp., which just acquired Dow Jones, once offered to merge its MySpace with Yahoo in exchange for a 25% stake in the combined entity. News Corp. continues to buy up vertical interests, such as BrandAlley.co.uk, the British subsidiary of one of France's leading fashion Web sites. Silicon Valley venture capital firm Silver Lake, and New York-based Quadrangle Partners have been mentioned as having interests, connections and resources to do such deals. Potential Internet buyout targets are popping up everywhere, stretching from eBay, ValueClick and Monster.com to CNET, TheStreet.com and The Knot.

Future deals will be held to new valuation standards set by the Microsoft-Yahoo deal, if it closes. Analysts say the $31 a share Microsoft has offered is 15 times Yahoo's estimated 2009 earnings. But by 2011, the combined company would have a 20% boost in revenue synergies and move closer to Google's 50% earnings margins. The deal represents a 14% return on investment for Microsoft, and would represent less than 10% of Microsoft's overall businesses. Bernstein Research estimates it would take Yahoo that long to restore its shares to the $31 level if its current restructuring succeeds.

On the flip side, the consolidation of major Internet players generally can be bad for entrepreneurial and start-up companies looking to ride coattails to success. As a result, there could be a venture capital investment slowdown during this shakeout.

Microsoft's hostile offer for Yahoo is generally considered the opening salvo in the battle for the online search, display and social advertising opportunities as stock prices and company valuations sink to new lows in a cautious deal market still flush with cash. But many would-be buyers and sellers may be privately contemplating that it is not worth the effort at any price. Such mega tech deals almost never work as planned.

"Acquisitions are messy, ranging from trying to consolidate advertisers on one platform to figuring out what to do about competing brands like Yahoo!, MSN.com, and Windows Live," blogged Forrester Research analyst Charlene Li. "Cultural differences, geographic distances, and different technology platforms will also muck up things, making a merger highly distracting to an organization that needs to be focused on a highly competitive marketplace."

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