• October 6, 2008

Sanford C. Bernstein has cut its price target on Yahoo to $21 from $24, noting that while a deal with AOL could boost Yahoo's value, the research firm doesn't believe one is impending.

The Financial Times reported last month that Yahoo's board had cleared the way for a new round of talks with the Time Warner unit after breaking off earlier negotiations this spring during its takeover battle with Microsoft.

Bernstein analyst Jeffrey Lindsay said both sides could potentially benefit from cost savings through such as deal.

But it could also threaten AOL's paid search agreement with Google--jeopardizing about $309 million in earnings before interest, tax, depreciation and amortization (EBITDA), or most of the potential gains from the merger, he added.

Yahoo's own paid search deal with Google has been placed on hold by the companies while the Department of Justice continues an antitrust investigation.

TechCrunch reported Monday that marathon merger discussions between Yahoo and AOL are ongoing, with a deal possibly happening as soon as this month. Yahoo shares closed Monday down more than 4%, at $15.31.--Mark Walsh