Microsoft Said to Be Talking With News Corporation About Joint Yahoo Bid

It's hard to answer your question. Yahoo gets a significant amount of traffic (around 500 million users) that it doesn't monetize (it's biggest problem) as well as Google and Microsoft sees merging with Yahoo (combining pageviews and engineering talent) as sort of a Custer's Last Stand / Alamo against the inevitability of Google becoming the premier advertising service on the Internet and becoming the provider of whatever supplants CPM advertising in the future (potentially something that measures your direct influence on people to buy products - Facebook SocialAds just the beginning - see http://news.ycombinator.com/item?id=119295)

There are a lot of If's

If Google contextual ads weren't like The Blob and eating up the CPMs of its competitors

If a Microsoft merger with Yahoo managed to arithmetically combine their traffic (pageviews to properties and more importantly, search traffic)

If Yahoo didn't start showing signs of trouble (reorgs, Jerry Yang coming back)

If Microsoft managed to inject some of Yahoo's engineering talent (Yahoo pipes, for example) into its organization (notwithstanding some of the premier engineers + leaders have left/are leaving)

Wouldn't the declining value of Yahoo over time have something to do with it? Yahoo stock was as high as $30 in early 2007 and was trading at under $20 when Microsoft made the announcement. Certainly the stock price has bumped up but imagine what Microsoft would have to put up if Yahoo was trading at $30 before this potential deal was announced.

Also, we have yet to see what price the Yahoo board would actually sell at. In light of their saggy long-term growth outlook and numerous attempts to run away from the deal (deals or mergers with Google or AOL) a decent stock bump from a News Corp/Microsoft combination would test their sincerity re: a higher price.