This morning after reading Google's response to Microsoft's hostile bid to buy Yahoo I wrote the following knowing it was unlikely the government would ever permit Google to buy Yahoo:

I wonder if Google won't try to work on some cash-injection/investment plan in Yahoo (similar to what Apple accepted from Microsoft right when Steve Jobs came back to the company) to try and make it so that Yahoo won't have to be taken over by Microsoft. Or perhaps Google could try to funnel money to someone like News Corp. so they can put in a bid - News Corp. does seem open to someone buying into MySpace, and Google has a large ad-deal with MySpace...

And now by mid-afternoon we have a report coming from Reuters that Yahoo is very much considering an alliance of some kind with Google so they aren't forced to accept the Microsoft bid. Such talks between the two were have said to have originally taken place months ago, but nothing came from them. The Wall Street Journal is reporting now that Google CEO Eric Schmidt has called Yahoo CEO Jerry Yang to offer his help to stop the takeover.

While some are speculating these reports along with the others suggesting Yahoo is in contact with several other media, technology, telephone and financial companies about potential counter bids could just be meant to drive up Microsoft's bidding price from $31 a share for the company to upwards of $40+ a share, there does appear to at least some truth to Yahoo especially not wanting to be taken over by Microsoft.

We already know that Yahoo turned down a private proposal from Microsoft a few days before their public one, and Yahoo is said to be very displeased with the way Microsoft has handled the entire affair. The New York Times DealBook has a great rundown of just exactly how hostile this takeover attempt is. Microsoft knows full well the intricacies of Yahoo's inner-workings and has seemingly timed this public offer perfectly so as for it to be in their favor to get done - by any means necessary, even replacing Yahoo's board.

Is Steve Ballmer still running Microsoft, or is this Gordon Gekko?

Speaking of Ballmer, if Microsoft fails in this attempt to buy Yahoo somehow, it may be time for him to go. From an outsider's glance it might make sense for Microsoft and Yahoo to become one - for both sides. It seems obvious at this point that neither will be able to catch Google on their own, so why is Yahoo so against the idea of joining with a company that can help them take down their chief competitor - to the point where they seek anyone else, and are even willing to partner with that #1 competitor? Well there certainly is still very much a 'big brother' aura around Microsoft these days despite their promises to be a more open company. It may be that no matter what they do, the image of their company will not improve until Ballmer, a very divisive figure, leaves.

Remember Microsoft is said to have actually offered more money to DoubleClick to buy them - but DoubleClick went with Google anyways. A few months later it very likely could have been this lasting memory that led Microsoft to buy a stake in Facebook that essentially put its valuation at a ridiculous $15 billion dollars - they weren't about to be underbid but lose to Google again. Now if Microsoft loses this Yahoo deal to a much smaller Google/Yahoo alliance, it would seem time for Microsoft to make some drastic changes to alter their outside perception.

I would not be shocked at all to see some soft of Yahoo/Google alliance, but it might be even more likely I think that Google indirectly helps some other company make a bid at Yahoo (as I noted in my previous post) - because an alliance may not be enough stop the hostile takeover that has been set in motion. Will Google help Yahoo somehow cut the ring of power from Ballmer's hand?

[photo: New Line Cinemas]