Yahoo's conundrum: White knights are hard to find

Yahoo is reportedly holding out hopes that there's an alternative to Microsoft's $44.6 billion unsolicited takeover, but it's becoming clear that white knights are missing in action.

According to the Wall Street Journal, Yahoo is studying alternatives to Microsoft's bid hoping that it can avoid a Microsoft takeover. The problem: Hope isn't a strategy. And as the days go by Yahoo will face increasing pressure to join Microsoft.

There are a few dynamics that hamper Yahoo's search for a white knight bid. Among them:

• Microsoft floated a strong offer at $31 a share. News Corp. said it wasn't interested and it's unclear whether any company other than Google could step up and match Microsoft's price. In many respects, Microsoft's bid for Yahoo resembles News Corp.'s offer for Dow Jones. Both came in with high bids that made it very difficult for another bidder to spoil the party.
• Private equity is on the sidelines. Leveraged buyouts don't work when the credit market is on ice. It's highly unlikely that any private equity firm could cobble together $44.6 billion without rounding up a bunch of partners. And herding multiple parties isn't easy.
• Google can't bid alone due to regulator concerns. Regulators are likely to frown on a Google offer for Yahoo. These regulators may not like Microsoft's bid either, but the deal lines up better. Google can raise a ruckus, but may not be able to do much more.
• The longer Yahoo holds out the less likely any player will step up to the plate. Is there any benefit of jumping in the pool first?

As Yahoo's options are checked off the only move the company has is to outsource search to Google in a move Citigroup estimates would boost earnings by 25 percent. However, outsourcing search to Google may also raise regulator hackles. And if you're a Yahoo shareholder it's still unclear that outsourcing search to Google will get you more than $31 a share.