Yahoo! May Yet Reward Patience

At the end of the day, what's abundantly clear from following Yahoo! during the 2008 post-buyout-rejection months is that the only payoff for owning the stock is with a longer view. If investors are unwilling to endure some pain in the months ahead with a formerly great Internet company awaiting a new CEO amid a retrenchment in online advertising, this probably isn't the stock for them.

The good news is that a compelling argument can be made for those willing to be patient. Topping the list is valuation: Yahoo! is trading at just over 2 times trailing revenue, less than half its level from the past four or five quarters.

Certainly some of that compression has resulted from the company's slowing revenue growth. Year-over-year revenue rose just 1% in the company's most recent quarter, whereas it had climbed 6% three months earlier.

But Yahoo! needn't be headed for the dustbin. While the company's search business continues to cede market share to Google(GOOG Quote), Yahoo! still has attractive assets and a powerful online display advertising reach that can be expanded once the company regains focus.

That's not to say the likelihood of a deal with Microsoft, at least via a search transaction, should be ignored. Such an agreement makes great sense for both companies, which could make the challenge for search-advertising dollars more interesting as they leverage their online properties to capture a higher percentage of queries.

However, making sense and making a deal are two different things. Yahoo!'s attractiveness at these levels doesn't have to depend on reading the tea leaves out of Redmond, Wash.