An AOL-Yahoo deal, with AOL retaining its Google search relationship, could rival Microsoft's initial $31-a-share buyout bid for Yahoo, according to Charles Di Bona, a research analyst at Sanford C. Bernstein.
That was one of three scenarios Di Bona laid out in a research note on Friday, and his favorite.
If Yahoo and AOL were to merge, Di Bona estimates that it could yield investors $28 a share. But that depends on AOL parent Time Warner kicking in $2 billion for its Yahoo stake and the combined entity generating a minimum of $500 million in synergies.
A better deal would be for Yahoo and AOL to merge, but for AOL to retain its lucrative Google search deal. And the value of such an arrangement? A merger deal that could ultimately yield $31 a share, Di Bona estimates.
A price in that range would bring Yahoo investors back to the level of Microsoft's initial cash-and-stock offer, which has fallen to a value $29.34, as Microsoft's shares have declined since the bid was announced February 1.
As for a third option of AOL and Yahoo both relinquishing their search to Google, Di Bona casts doubt that such as scenario will come to fruition.
Meanwhile, the software giant's chief operating officer, Kevin Turner, reiterated Microsoft's stance that its initial offer was "fair," according to a Reuters report Friday on a presentation the chief operating officer gave in India. Turner was there to unveil Microsoft's strategic initiatives with the region's HCL Infosystems.
"We believe we've made a very fair offer to Yahoo's board of directors," Turner said, noting that a Yahoo acquisition would fit with the software giant's strategy to increase its market share with consumers via search.
"The rest is now up to (Yahoo's) board...With or without the acquisition, we are committed to becoming a world-class digital-advertising company," Turner said in the Reuters report.
While the we-can-live-with-them-or-without-them comment sounds apathetic, Microsoft'sdoes not.