Like a basketball game near the half and the home team down by 20, Yahoo is to go into a 4 point stall using AOL for a cover on merger write offs. The rumor details here.
But I hate to say it — does this make sense? From a strictly financial view I say no. All you would have is two weak second tier players waddling down the street hand in hand. They would still face an uphill battle getting their systems integrated, layoffs, etc. Another words a 4-5 year effort to still be a number two.
But I will tell you where it does make sense — the board room. By Yahoo buying AOL from Time-Warner they take on debt and make the meal that Microsoft has to swallow that much bigger. Its a variant of the poison pill defense. Most likely at that point Microsoft backs off from any take over efforts. The Yahoo crowd then uses the cover of merger write offs to bury a lot of old bad decisions.
Its a merger of convenience folks, with little or no synergy opportunities to be had.