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Apple, Yahoo! Tie-Up: Examining the Possibilities (Update 2)

Stocks in this article: AAPL YHOO GOOG

Mayer's Yahoo! and Tim Cook's Apple seem to be a natural fit when it comes to a partnership. The two companies have a common "frenemy" in Google, and working closer together makes sense. I opined last month that a closer relationship between the two companies wouldn't hurt when news broke that Yahoo! was looking at larger acquisitions. I suggested that Mayer should look at acquiring Yelp (YELP), which already has a presence on iOS, via Apple Maps.

Apple sold over 70 million iPhones and iPads in its most recent quarter, and is estimated to sell more than 200 million iOS devices this year. Any incremental revenue that Yahoo! can generate from an increased partnership with Apple would not only boost Yahoo!'s reputation among developers and Silicon Valley, it would help reinvigorate growth at core Yahoo!, which is what Mayer has been paid handsomely to do.

A large portion of Yahoo!'s share price rise has been due to the increased value of its Asian assets, namely Alibaba and Yahoo! Japan, but core Yahoo! is slowly starting to turn around. Yahoo! was able to demonstrate annual revenue growth for the first time in four years in its fourth quarter. Any additional revenue would continue to show that Mayer is turning core Yahoo! around, and the run up in the stock price is about more than just the Asian assets.

Though no deal is forthcoming between the two companies, the possibilities should make Yahoo! investors reaffirm in their conviction that Mayer is the right person for the job.

-- Written by Chris Ciaccia in New York

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