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Back on October 8, I posted a blog blaring that the Microsoft

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[MSFT  Loading...      ()   ]and Yahoo

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[YHOO  Loading...      ()   ] talk had staged a comeback, that because Yahoo's share price had fallen so far, so fast, that a new deal on the table between the two could make sense. The mail I got after that post essentially thought I was nuts to even "go there."

Nuts no more, I suppose. Microsoft CEO Steve Ballmer, speaking at the Gartner ITXpo in Orlando, Florida today said that an acquisition of Yahoo would still "make sense economically" for shareholders at both companies. His comments came during the question and answer portion of his keynote address. He says he doesn't know what price Yahoo would entertain now, but did suggest that Yahoo "probably thinks it's still worth at least as much today" as the $33 a share it was willing to accept way back when.

Remember that Microsoft was said to have gotten as high as $34 (correction from earlier posting)  as Yahoo's management team continued to hold out for more, despite a 70 percent premium on the table. Talks ultimately broke off completely in what many believed at the time to be among the most bungled negotiation ploys by any company as far as Yahoo's strategy was concerned.

It's not clear whether Ballmer is merely speculating, or whether any kind of negotiations have resumed. I'm still trying to nail that down.

So here we are again. American Technology Research's Rob Sanderson wrote a report last week that a new offer by Microsoft may be in the offing. That heavy breathing you might be hearing is Sanderson taking his victory lap.

The facts are simple: Since these negotiations fell apart, Microsoft shares are down about 20 percent. But Yahoo has plunged 40 percent with no signs at all that any recovery is in the offing. Yahoo was trading in the $13 a share range, even dipped into the $12 range. With Microsoft's $25 billion cash position, it can write a check for Yahoo and its $18 billion market cap.

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Yahoo's cheap. Microsoft still needs Yahoo. Yahoo still needs an exit strategy. The company will report earnings next Tuesday, and there's wide speculation that a major layoff and restructuring is being worked out as well. That could be critical window-dressing if a deal between Microsoft and Yahoo still has a chance. The reasons why Microsoft needs Yahoo haven't changed. Nor have the reasons why Yahoo needs Microsoft.

The deal makes sense. And for Yahoo shareholders, it's their only realistic chance of stemming the tide and putting a bottom on these shares. They hoped for a "top." They'll have to settle for a bottom.

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UPDATE: I've just gotten off the phone with someone close to Microsoft. If negotiations of any kind had resumed, this person should know. This person tells me that no new negotiations of any kind have resumed between the two; that "Yahoo didn't want to be sold back then, and doesn't want to sell now. Nothing has changed on that front." But that's not to say that current economics wouldn't make a deal that much more attractive for both sides.

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