Here's Why Apple (AAPL) Should Buy Yahoo! (YHOO)

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February 22, 2012 3:14 PM EST
The case for Apple (Nasdaq: AAPL) buying Yahoo! (Nasdaq: YHOO) is an interesting one...

Though the idea has been mulled in the past by investors and traders alike, it was mostly as a fleeting thought. A recent article in Forbes, however, makes a few solid points for the move.
  • Yahoo! is insanely inexpensive. Forbes noted Yahoo!'s market cap is just $18 billion; Apple probably wouldn't want Yahoo! Japan or Yahoo!'s Alibaba stake. With these stakes recently valued $17 billion (which Yahoo! said was too low), Apple could sell those assets for $18 billion in a cash-rich split and effectively come out with $12 billion in cash and $6 billion of other assets.

    Assuming a 30 percent premium for Yahoo! (laughable, but Yahoo! shares have been 30 percent higher within the last year) less what Apple would get back in the Asian sale, the company could pay only $8 billion in cash for Yahoo!.

  • Forbes questions whether Apple is still serious with its iAds division. After acquiring Quattro Wireless and launching iAds to much fanfare, the momentum has subsided. With Yahoo!, Forbes argues Apple will get a hungry sales team which has been somewhat of the whipping boy over the last few years.

  • Apple's ecosystem needs to expand. Google (Nasdaq: GOOG) hosts tons of mobile info apps already pre-installed, from Maps to Search. Apple lacks a lot of the same features, but Yahoo! has offerings like Flickr, Yahoo! Finance, and Video which would bolster Apples iOS.

  • Yahoo!, though currently outsourcing search to Microsoft's (Nasdaq: MSFT) Bing, could cancel that contract and improve Siri's results for voice search. Apple could partner with Microsoft, Forbes said, but it's more likely to want to go out on its own.

  • Rounding out the list are patents (Yahoo! has at least 1,000), Payments (could appear on iPhone 5, Yahoo! CEO Scott Thompson also ran PayPal), IntoNow (a potentially huge social app for TV viewing, could meld into Apple's rumored TV set).

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