5 Reasons Why Apple Will Buy Yahoo

Something happened last Thursday 13th of November at 1300 PST, Yahoo Share prices reached their lowest point ever at $9.78, the first time EVER they went below the $10 barrier (ed: they have since recovered... but for how long?) as it enters "junk status" territory.

This valued the company at around $14 billion which, in absolute terms, is a bargain if you have the money to do so. And Apple, which is sitting on cash reserves of more than $24 billion, has the means to do just that.

So why would Yahoo sell to Apple and not to Microsoft and why would Apple buy Yahoo in the first place?

(1) Google and Microsoft

Unlike Microsoft, Apple will not try to destroy Yahoo's core properties - its search engine, but will instead try to tie up things together and provide a coherent, stiff backbone to a company which have been ravaged by layoffs and a wobbly management. Apple will want Yahoo because Google is becoming too competitive, having started to tread on Apple's own turf with Android.

(2) Same (Chequered) History?

Yahoo was once the darling of its sector but met with a colossal competitor, Google, and things got worse thanks to poor management. Similarly, Apple had its golden age back in the early 1990's but met with a colossal competitor, Microsoft and things got worse thanks to poor management (Gil Amelio anyone?). Apple had Steve Jobs to thank for the revival of the company. Jerry Yang has not been able to do the same for Yahoo.

(3) Yahoo will be happy with Apple Shares

Our (uneducated) guess is that Apple shares are bound to rebound faster and higher than most of its competitors once the recession is over. Right now, Apple shares are being battered like a heavyweight champion on a ring, but even as they lost half of their value, the company is not down - far from that.

It is very likely, that Yahoo shareholders may want to get Apple shares rather than green notes as they will almost be guaranteed a better return on investment within 24 months.