These are crazy times, which means crazy stories have a way of percolating up to the general consciousness. But renewed speculation of a Microsoft play for Yahoo may not sound so crazy.

This latest round of headlines comes amid some interesting developments on the on-again, off-again, on-again, off-again saga of Microsoft

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[MSFT  Loading...      ()   ] and Yahoo.

Some reports suggest that Yahoo

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[YHOO  Loading...      ()   ] CEO Jerry Yang and company president Sue Decker are in New York trying to put the finishing touches on a Time Warner

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[TWX  Loading...      ()   ] tie-up involving AOL, though heaven only knows why Yahoo thinks that's a good idea. There's talk of a massive layoff looming at Yahoo which some analysts say suggests some aggressive window-dressing by the company. There's a note out from American Technology Research's Rob Sanderson this morning that Microsoft may indeed be gearing up for a new offer for Yahoo, though at a "significantly" reduced price. And then there's Yahoo's stock price, which dipped into the *gasp $13 a share range today.

Sanderson says Microsoft's online services business has been a sore underperformer, suffering decelerated, organic revenue growth from 16 percent in March to a paltry 2 percent in June. Losses nearly doubled sequentially from $1 billion in March to a $2 billion loss run-rate in June. Sanderson also took his Yahoo target to $22 a share from his previous expectation of $33 a share after cutting his revenue expectation to $1.78 billion from his initial $1.85 billion. He also cut Yahoo earnings estimates by a penny, from 9 cents to 8 cents for the quarter.

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At the same time, Bank of America

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[BAC  Loading...      ()   ] also cut its Yahoo target from $24 to $16 a share.

So why would Microsoft want to make a play for Yahoo now? It's cheap, for one. Yahoo's shares hover near a 5-year low, with the company now boasting a $19 billion market cap. That's a far cry from Microsoft's $47.5 billion offer from just last May! It just gets uglier and uglier for Yahoo.

Since May, by the way, Microsoft shares are down about 20 percent, and half that decline has occurred in the last week or so. Yahoo? Off a whopping 45 percent over the same period. Microsoft also still desperately needs an online strategy and certainly has the war chest to do for Yahoo what Yahoo can't seem to do by itself. I'm not saying two weak links against Google

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[GOOG  Loading...      ()   ] can automatically be a success, but if there's strength in numbers, a combined Microsoft and Yahoo seems to have a far better shot together than apart.

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Hubris is an awful trait when you're playing with other people's money. But that's exactly what has happened at Yahoo these last several months. It's not as if Yang merely thought he could get more for his company; it's that he believed he DESERVED more. Yahoo's true owners, its shareholders, might think otherwise, yet they're the ones who voted Yang and board back for another chance.

Here's that second chance, or fifth, or eighth chance, but who's counting? We all know that Yang's roll of the dice came up craps. He may yet have another turn at the table, and with Yahoo shares in free-fall, investors might be hoping he doesn't pick up his chips again, and leaves the table empty-handed.

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