The big money interests behind the scenes of the Microsoft and Yahoo drama - or in the case of activist investor, Carl Icahn, stridently in front - are unlikely to be happy with any revived talks between the two companies short of Microsoft's making a full takeover of Yahoo, say industry and financial experts.
Unhappy Yahoo investors bet too much money on a US$45 billion-plus Microsoft acquisition of the beleaguered Web company. Emboldened by Icahn's public threat last week to force a proxy fight and resulting sale of Yahoo, they are demanding that the paper profits they were counting on rematerialize again.
"At this point, somebody has to buy [Yahoo]," said Michael Angell, editor of Flashwire Daily, a newsletter about mergers and acquisitions published by investment data provider, FactSet Research Systems.
Others say Yahoo's dismissal of Icahn last week may have inadvertently and unwisely insulted the notoriously tough corporate raider.
"The way [Yahoo] responded was relatively personal," said Rob Enderle, an analyst at San Jose-based Enderle Group. "They basically implied that he was clueless, so that makes it much more likely that he's going to want to drive through this to prove that he's not."
Yahoo shareholders such as Eric Jackson, president of Ironfire Capital, an activist investment firm, say a partial deal is "not as preferable" as an immediate buyout.
"It's a half-step that Yahoo might embrace as a way of retaining independence, and Microsoft might embrace as a foothold to the eventual endgame," he wrote in a blog. "But the endgame is the endgame. Microsoft will buy Yahoo"
Other experts suggested Microsoft and Yahoo might be negotiating a joint-venture in the online ad business, to present a stronger challenger to Google.
But that too is unlikely to appease investors who are worried about the teetering economy, and would prefer to bring this four-month soap opera to a close.
"There's some sense they would prefer to cash out and get some money in hand rather than try to grow the business," said Allan Krans, an analyst at Technology Business Research.