Microsoft Surrounds Yahoo?

Analyst: Microsoft Should Buy Yahoo

A Merrill Lynch analyst proposes a defensive play against Google.

A Merrill Lynch analyst is rekindling an old Internet romance story. Merrill analyst Justin Post brought back suggestions that Redmond software behemoth Microsoft should consider a Yahoo acquisition. He said the No. 2 search company would be a catch for either Microsoft or a large media company looking to boost its online presence. “A Microsoft-Yahoo combination would be in a better position, in our view, to compete against Google,” Mr. Post wrote in a research note Monday. For Microsoft, a deal for Yahoo would reduce the pressure on it to increase the market share and profitability of its MSN business, the analyst noted. Microsoft’s year-to-year sales growth of 5 percent in Internet advertising was well below estimates for industry growth of 26 percent, Mr. Post noted. “Microsoft’s AdCenter is just beginning to build its advertiser base,” he wrote.