Odds for Yahoo-AOL deal may increase

Yahoo's board reportedly set the stage for additional talks with Time Warner's AOL unit for some kind of deal.According to a relatively thin Financial Times report Yahoo's board approved talks with Time Warner about the future of AOL.

Yahoo's board reportedly set the stage for additional talks with Time Warner's AOL unit for some kind of deal.

According to a relatively thin Financial Times report Yahoo's board approved talks with Time Warner about the future of AOL. Time Warner has been trying to unload AOL for what seems like an eternity. Yahoo has been talking to Time Warner for what seems like an eternity too. Remember that Yahoo was talking to Time Warner as part of its "there's no way in hell we're going to be acquired by Microsoft" defense.

And we all know how that defense worked out. In a nutshell, Carl Icahn and its two sidekicks--former Viacom CEO Frank Biondi and former Nextel Partners chief Frank Chapple--didn't get much done at their first Yahoo board meeting.

I'm not terribly upbeat about AOL as part of Yahoo. Why? Two ailing Web 1.0 companies don't make one healthy one. AOL plus Yahoo doesn't add up.

Yahoo’s performance year to date:

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And Time Warner’s:

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These two aren’t exactly poster companies for shareholder value. But I also realize that Yahoo has to look like it's doing something.

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After all, Microsoft is spending its money elsewhere. The software giant announced a $40 billion share buyback this week. Simply put, Microsoft is spending its money on its own shares instead of Yahoo's. Yahoo's rejection of Microsoft's overtures is beginning to look as bad as Brian Dunkleman's (right) decision to quit as host of American Idol after the first season. We know how that one turned out too. Instead of being Ryan Seacrest, Dunkleman (photo credit Howardstern.com) is doing stand-up and judging a big loser contest on the Howard Stern show.

And Yahoo isn't doing much better.

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