• Yahoo!, Thursday, January 5, 2006 11 AM

With rumors swirling that Yahoo! may end up in some sort of deal with Microsoft, option investors are betting on additional gains in shares of the Web media company. According to Reuters, "Analysts said reasons for the heightened interest in Yahoo! call options ranged from recent rumors that software company Microsoft Corp. might be seeking to partner or merge with the Internet company, to bullish expectations for the company's upcoming fourth quarter earnings report." Rumors of a Yahoo!-Microsoft alliance have amped up since last month's announcement that Google would take a five percent stake in Time Warner's AOL unit. Microsoft had competed against archrival Google for a piece of AOL in what was seen as a win-win advertising play for both companies. Yahoo! to this point remains an independent media company, although it is often thought to be a candidate for a major deal, either as an acquirer of another major company or--less likely these days, given its valuation--an acquisition target.

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