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Microsoft must have tried out everything to foil the Yahoo/Google deal before it finally decided to give up the idea of buying out Yahoo, but it appears Ballmer has a soft corner for the failing business. We reported earlier how Yahoo’s dreams have been dented with stocks going down to less than $12 a share and its valuation being tipped at around $14 billion. This is about one third of the $44+ billion Microsoft had offered, something that the starving shareholders are dreaming to grab if oppurtunity strikes.

Ballmer hinted that Microsoft may think about buying Yahoo, despite all the arrogance shown by the firm. What’s important is the impact the single sentence had on Yahoo stocks that rose over $12 to $12.4 almost immediately.

What one has to see is how Yahoo moves ahead in case Microsoft places its value? We already had rumors or Microsoft proposing Yahoo $22 a share and if there is even a glimpse of it, Yahoo should take the bait. Why? We all know that the company had been successful for so long and had been a pioneer in the Web business, but it has been acting clumsy lately. Yang’s stubbornness, rivalry within the board, mass exits by senior Yahoo executives, all signal that there is a need for a change, be it pulling off the current management and getting and breathing fresh air or by lay-offs to cut short the expenses (that I find quite stupid as the current fall is due to random management).

What I have come to think after all this is, Yang perhaps has a notion of being Steve Jobs for Yahoo; he may very well be that and turn failure into success, but he hasn’t really shown much apart from ringing loud all optimism. What I would seriously advice Yahoo is to initiate talks and prolong them long enough to see where the Google deal ends up. This may stabilize their stocks with shareholders seeing negotiations with Microsoft as a positive sign. As I said previously, Yahoo has to be a bit cunning and play the cards right.