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How Pros Are Trading Buzz About a Microsoft Bid for Yahoo

Wednesday, 5 Oct 2011 | 7:31 PM ET

Microsoft is considering a bid for Yahoo!, according to published reports Wednesday.

Sources tell Reuters that Microsoft may seek a partner to go after the struggling Internet company . But Kara Swisher, co-executive editor of the All Things Digital web site, said her sources say it's not going to happen. Then again, Microsoft had unsuccessfully tried to take over Yahoo! in 2008.

WOTS: Tech Take Over Talk
Discussing possible suitors for Yahoo, with Kara Swisher, All Things Digital, and Ken Sena provides perspective on whether Microsoft, or Alibaba will make a deal with Yahoo. Also, Brent Thill, UBS analyst with a look at Microsoft's XBox 360 efforts.

If Microsoft is going after Yahoo! yet again, it joins a host of other companies looking at the Internet player, including buyout shops Providence Equity Partners, Hellman & Friedman and Silver Lake Partners, as well as Chinese e-commerce giant Alibaba and Russian technology investment firm DST Global. So Joe Terranova of Virtus Investment Partners thinks it will be a "race to the finish."

Trader Stephen L. Weiss doesn't understand why Microsoft would want Yahoo!. The Short Hills Capital founder noted it already made a major acquisition earlier this year with the purchase of Skype. In addition, Microsoft already has its own search business, so he's not sure what Yahoo! brings to the table.

So what's the trade?

Terranova blessed Yahoo! as a trade. In the long-term, however, he recommends investors be nimble because "when the rug gets pulled out from underneath, it's not going to look good."

As a Microsoft shareholder, trader Karen Finerman would rather Microsoft not buy Yahoo!. Nonetheless, she is bullish on Yahoo!, but would also sell some out-of-the-money calls against it.

"Yahoo! is a screaming buy," said Guy Adami, managing partner at Drakon Capital, adding that it's continued to have good price action despite a lousy market. "Get on the Yahoo! train."

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CNBC.com with wires.

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