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"The Wall St. buzz is that msft and yhoo are bidding for eBay. My source tells me that Yahoo! has bid 1.76 shares for eBay ($40-41) and is expected to win at that price." So writes Scot Wingo, the plugged-in CEO of ChannelAdvisor, an auctions-software maker in which eBay owns a minority stake. Let's dissect that rumor, shall we?

The deal does offer a generous 25 percent premium to eBay shareholders, pricing the company's shares at the 52-week-high they briefly touched in October. But as proposed, it would be ruinously dilutive to Yahoo shareholders, leaving them with 36 percent of the combined company. Why a Yahoo shareholder would settle for this escapes me, however, unless they have completely written off Yahoo's management, brand, and assets.

Which is not out of the question. At the levels Yahoo's trading at, shareholders are essentially paying for its minority stakes in Yahoo Japan, Alibaba in China, and Gmarket in Korea. But if a shareholder would be disillusioned enough to accept this deal, one wonders why they wouldn't simply sell their Yahoo shares and buy eBay shares on the open market, where they're considerably cheaper.

I don't know if this plan is being seriously considered within Yahoo. As many have written, Yahoo and eBay's assets make a nice strategic fit, in theory; eBay's PayPal already has a search-ads partnership with Yahoo, and the two companies have other advertising deals. Google is actively pursuing a profitable combination of search and e-commerce through its Checkout initiative, sharpening the threat to both Yahoo and eBay. Not to mention Skype, which eBay has written off but could find a better fit with Yahoo's mail and IM products.

But in practice? The reality is that both companies are collections of underused assets, with management that has allowed vital talent to flee. Putting them together might provide a needed shakeout of eBay and Yahoo's overstaffed executive suites, but the transition would be chaotic and painful.

A much simpler course would be selling out to Microsoft or News Corp., which surely remain interested in Yahoo's online-advertising business, if they can stomach all the troubles that come with it.

That this rumor is circulating, that it's even being whispered about, suggests that Jerry Yang may have given up on being rescued by a deep-pocketed buyer. Issuing so much undervalued paper for eBay smacks of desperation. It would keep Yahoo independent, but at a very steep price. So steep that, if it's being seriously considered, can only mean no one wants to buy Yahoo.