The new year is little more than a week away, and with it will come a new round of speculation over an Internet industry mega-merger. As 2007 ends we've seen one pundit argue why a deal linking Amazon.com Inc. [AMZN] and eBay Inc. [EBAY] would makes sense, and another imploring a private equity firm to buy Yahoo! Inc. [YHOO]. Of the two, a Yahoo! buyout seems more likely, but both remain long-shots.

An eBay-Amazon hook-up is easier to discount. Simply put, neither really would be interested in the other. Amazon has a lot of momentum and is unlikely to want to join its fate to a company that doesn't. Amazon has mostly stayed away from acquisitions, preferring partnerships to outright buys. Buying Yahoo! would represent not only a real roll of the dice for a company unaccustomed to major corporate integrations.  

eBay, meanwhile, seems like a company that wants to fix its own problems. To that end, it could choose to spin out its PayPal payment service to realize its full value. There are also a range of acquisitions it can make to augment its core auction business.

By contrast, Yahoo! might be inching closer to seriously considering a buyout. Rumors of talks between it and Microsoft Corp. [MSFT] have circulated for a while now, and on paper such a deal makes sense as a way to combat Google Inc. [GOOG]. But a private equity buyout might make even more sense, as a PE firm would be more effective at cutting the fat at Yahoo! and boosting its value. Jerry Yang won't want to remain as CEO indefinitely, and if there's no visible progress at the company over the next year there will be ever mounting pressure to do a major deal. - David Shabelman

See Dec. 14 post from The New York Times
See Dec. 19 post from HipMojo.com
See Aug. 20 post from Tech Confidential