• Silicon Alley Insider, Monday, February 18, 2008 11:46 AM

The London Telegraph (link: http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/02/17/cnaol117.xml) says Yahoo's merger talks with AOL have improved after Yahoo advisers held talks with the Time Warner company last week, although the paper warns that Google's 5 percent ownership of AOL could be a stumbling block to an AOL-Yahoo deal.

The Silicon Alley Insider says AOL and Yahoo should merge, but the problem with that deal is that it wouldn't yield a viable alternative to a Microsoft takeover. AOL has some valuable assets--AIM, ICQ, mail, premium properties, MapQuest--but it has no place in the current portal wars, which is why combining its assets with Yahoo makes sense. However--and this is the same problem with a News Corp. deal--Yahoo shareholders would never buy the argument that an AOL merger is more valuable than a Microsoft buyout.

From the perspective of Yahoo shareholders, the best of the many hypothetical deals being discussed--by far--is Microsoft's $31 per share."

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