*Extra* Why AT&T's Desire to Buy AOL is Good News for Amazon and the Rest

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By the time my

column made it to your computer screen this morning it was worthless. I hadn't seen or heard about the

Financial Times

story that confirmed this column's

speculation of a week ago -- that

America Online

(AOL)

and

AT&T

(T) - Get Report

had indeed been in takeover discussions. According to the story, AT&T's CEO

Michael Armstrong

wants into the Internet space in the worst way.

So, why was the column worthless? It's not because Amazon's stock is up another 6 as I write this -- adding around $400 million to its already lofty market value.

And it's not just because the stock is experiencing the mother of all short squeezes, as shorts are being forced to return their shares to their rightful owners. And it's not just because the Internet is the last good magnet for all that cash that has nowhere else to go.

The column was worthless because it missed the most obvious point about what is really going on in the Internet space today. And by today, I literally mean

today

. It was one thing when

NBC

said it would take a stake in

CNet's

(CNWK)

Snap!

It's another when AT&T, whose CEO isn't considered a wacko, says it wants to buy AOL -- and that it wants to do so when AOL's stock, which has been highly valued for years, is the highest it has ever been.

This isn't some fish oil company like

Zapata

(ZAP)

trying to buy

Excite

(XCIT)

. What AT&T is saying is that AOL's high value today doesn't really matter because AT&T believes it'll be more worth a heck of a lot more in the long run.

And it may very well be. But with AT&T putting its Good Housekeeping Seal of Approval on the Internet in such a bold way, investment bankers are likely to get their creative Internet deal-making juices jump-started.

And they're likely to find a receptive audience with companies that have suddenly become afflicted with the "I gotta have one, too" syndrome. NBC goes after Snap! AT&T goes after AOL. Who will go after

Amazon

(AMZN) - Get Report

? Or

Yahoo

(YHOO)

? Or

TheStreet.com

, for that matter? (Sure, we're private, but why not?)

Such deals may never happen, but herd mentality is hardly new. Jeff Matthews of

Ram Partners

was an oil-industry analyst back in the late 1970s when

Shell

bought out a company whose entire asset base consisted of California crude-oil reserves.

"Then everybody else said, 'If Shell is buying reserves in the ground, that must mean it's a good idea to buy reserves in the ground.' That triggered a spate of acquisitions that created a self-fulfilling prophecy. In hindsight, however, they were bad prices. In hindsight,

U.S. Steel

probably wishes it never bought

Marathon Oil

. In hindsight,

Texaco

(TX) - Get Report

probably wishes it never bought

Getty

. In hindsight,

DuPont

(DD) - Get Report

probably wishes it never bought

Conoco

."

Yeah, the Internet is different than oil services, and plenty of these combinations will make sense. But that doesn't mean there won't be a string of stupid ones.

Oh, and this morning

CNBC

reported that AOL said it's not for sale. Remember, everything's for sale at the right price.

And don't forget: Corporate America is haunted by the ghosts of CEOs who, while winning the battle, lost the war after realizing they overpaid, underinvestigated and miscalculated the importance of the deal.

Nothing like a little buyer's remorse to knock a little sense into a company, while knocking the wind out of its stock.

Herb Greenberg writes daily for

TheStreet.com

. In keeping with the editorial policy of

TSC

, he does not own or short individual stocks. He also does not invest in hedge funds or any other private investment partnership. He welcomes your feedback at herb@thestreet.com. Greenberg also writes the monthly "Against the Grain" column for

Fortune.