Yahoo! is already trading for a P/E less than 10. After stripping out cash and investments, and adjusting the P/E with a wide margin for error, it's a no-brainer for many to buy. For Apple, the case becomes even more compelling because it allows the iPhone maker to grow revenue relatively cheap and helps position Apple into new, but related areas that compliment Apple's competitive position.
Google (GOOG - Get Report) is arguably Apple's biggest competitor, even if indirectly as a result of the Android mobile platform. It used to be BlackBerry (BBRY - Get Report), but the iconic Canadian wireless provider is about one severe snow storm away from disappearing altogether.
Google depends on vast amounts of traffic to generate equally impressive ad revenue. According to comScore's July report, Yahoo! is No. 1 in unique visitors, followed closely by Google, and Apple comes in at No. 11.Beyond anything else, we know Apple is brilliant at monetizing everything it touches, something Yahoo! and Microsoft can't currently claim. Google's gift to provide relevant search results is only half their success story. The other half of its success is so simple that it makes my head hurt when I contemplate why Yahoo! and Microsoft's Bing never implemented it. The other half is how easy it is to buy ads in the Google network. Small businesses, the ones that are willing to pay the most for any given unit of ads, are all but unwelcomed by others, except for Google. An Apple-controlled Yahoo! would likely create a world-class search experience, and make it easier than Google does to buy ads faster than Ballmer can say, "Damn, I knew we should have bid $40." Yahoo! email, games, finance, and other segments may allow Apple to bring massive amounts of new people into the iSystem from around the world. If executed correctly, users will have less reason to migrate to Android and Apple can use the Web traffic from iDevices to increase the per-user revenue generated that is currently lost. Of course, a merger the size of Apple and Yahoo! will have its speed bumps, albeit this is an option that has an attractive ROI payoff, increases revenue and profit and could improve both their respective positions against Google and Microsoft. At the time of publication the author had no position in any of the stocks mentioned. Follow @RobertWeinstein This article was written by an independent contributor, separate from TheStreet's regular news coverage.