If Yahoo wants to fend off a 60% premium hostile offer, close to the ONLY thing it can do is to buy eBay inorder to make itself so big and the potential hostile merger so dilutive that Mr. Softie would say no thank. Chances of this happening is close to 1%.

If Yahoo + Microsoft does happen, eBay can kiss its chance of being acquired goodbye . . . and thus, it better figure out a plan to turn itself around quickly or the stock price will tank cause there will be no potential acquisitions around to artificailly pump up the stock price. (why the hell did eBay go up 7%? today?). Outside of a merger/acquisition by Yahoo or a straight up acquisition by Microsoft, I really dont see anyone with a modicum of strategic fit with eBay. Google is way way too proud/smug to be interested in a web 1.0 business . . . and even just looking at it financially I dont think there are many companies out big enough to buy ebay at a $30-$40B price tag. (adobe is the only one and thats really farfetched).

Another note. MSFT really saved the stock market today. Instead of crying recession wrt to the Google miss . . . the market was pumped up by the acquisition offer . . . and since most wall street models (quant and fundamental houses) use some sort of comparable valuation model, the jump in Yahoo really help keep the rest of NASDAQ afloat . . . that said, this is a short term thing. . . great time to play short on the market starting monday.