JP Morgan: Yahoo and eBay "Most Likely" Large-Caps to Couple
A 56-page JP Morgan report (pdf) by analyst Imran Khan and team suggests that of all the possible online giant pairings, Yahoo and eBay are the most likely because "a combined company would have the leading position in auctions, communications, payments, graphical advertising, audience reach, and geographic breadth."

(update 05/25/06: It HAPPENED: Yahoo + eBay Tie the Knot!)

The report also mentions, despite strong protestations from Semel that it would never happen, that MSN and Yahoo are a "feasable" couple.

Amey Stone at AOL's bloggingstocks offers four reasons why it won't happen, which I will paraphrase (and respond to):

1) "Even after negotiating seriously with both Microsoft and Google for months late last year, AOL still only sold A 5% stake to Google."
(Nice perspective. *IF* anything goes down it's likely go down small and in several months. Though I think the 5% of AOL deal was pretty BIG when you take a step back from it...)

2) Bankers like to talk about mergers because it gives them stiffies.
(Fair enough. Noted.)

3) Competing execs are often buddies and hang out and talk.
(I suspect it was something beyond a cook out or game of World of Warcraft that got folks talking on this one.)

4) WSJ got people hot about Yahoo + MSN recently and JP Morgan capitalized on the news industry's need for compelling stories and whipped up the report.
(Interesting.)

Stone doesn't dig into the report itself though (as far as I could tell), where JP Morgan suggests that a partnership or "strategic event" of some sort is likely due to the general need for: "1) increased scale, 2) strengthened global footprint, 3) broadened user insights, and 4) improved operational efficiencies."

I got through page 8 of the 56 page report. It's dry (though interesting), and didn't convince me one way or the other.

JP Morgan points out how Yahoo compliments eBay's weakness in China, while eBay compliments Yahoo's weakness in Europe. I'll point out (from my US-centric perspective) how Yahoo's social angle + familiarity with SMBs and the INCREDIBLE amount of buyer and seller profile data from eBay could make some very interesting babies.

Do I think Yahoo and eBay will partner? I'll leave you with 2 closing thoughts from Scott Devitt of brokerage Stifel Nicolaus:

1) "These things tend to be discussed often and rarely occur."
2) "EBay needs its relationship with Google."

Other Coverage:
Large-Cap Internet Courtships: Do They Make Sense?
Tie-ups between internet giants 'likely'
eBay, Yahoo Alliance Rumored
Garrett French - MarketSmart Interactive | permalink | +marktd |