MySpace, Yahoo swap would be brilliant--for Rupe

Legacies in business are made by buying low and selling high. The asset swapped doesn't matter. And if Rupert Murdoch manages to unload MySpace he'll cement his already impressive legacy.

The Times of London reports that Murdoch's News Corp. is exploring a swap of MySpace for a Yahoo stake north of 25 percent. The report is obviously a trial balloon. The Times says the stake of the enlarged group would be 30 percent. Michael Arrington says the stake is more like 25 percent.

In either case, MySpace (all BTL posts) would be valued at about $11 billion to $12 billion. This is about as good as it gets for a trader. News Corp. paid $580 million for MySpace just two years ago. That purchase has paid off in spades for News Corp.--even though monetization of MySpace is still light.

While Silicon Valley is ga-ga for social sites it's hard to buy the $12 billion-ish valuation for MySpace. It's even harder to buy when Facebook is giving MySpace hell and growing faster. The chance that MySpace will ever see Google-ish monetization rates is nil.

Translation: Murdoch is trying to sell at the top for MySpace's valuation. And by selling at the top he's buying an asset--Yahoo--that's likely to be at its low. What else could go wrong at Yahoo? The company has indicated that its current quarter will be light. It has changed CEOs. Yahoo is arguably the most unloved Web company with 130 million U.S. unique users--No. 1 per ComScore by the way--ever. That's the perfect time to buy.

And Murdoch knows it. Meanwhile, much of the ROI from the MySpace deal comes from an advertising pact with Google. Think that'll stick around if Yahoo buys MySpace? Of course not.

Why Murdoch would do such a deal is obvious. Why Yahoo would make such a MySpace swap isn't nearly as clear.