Will Comcast Now Buy Yahoo?

NEW YORK (TheStreet) -- With big speculative tech stocks finally rolling over -- Twitter (TWTR) and Facebook (FB) are both down over 10% in the last week -- maybe it's time to stop talking about big tech buying and start talking about big tech selling out.

The most obvious such play on my board would be Comcast (CMCSA) buying Yahoo! (YHOO).

There are already synergies. Yahoo! Sports works on-air with Comcast's NBCsn, and it has a large radio presence. NBCNews.com looks a lot like a Tumblr. Yahoo's New York offices are just blocks from Rockefeller Center.

Yahoo!'s news and mail services could easily replace Comcast's current online efforts. Integrating Yahoo!'s identification technology with Comcast's online video would provide synergy, and Yahoo!'s cloud would help with hosting all of Comcast's offerings.

A Yahoo! acquisition would face none of the antitrust scrutiny that Comcast's pending purchase of Time Warner Cable (TWC) does, and the completion of that purchase would leave Comcast with few routes to new U.S. growth anyway. Its only way to get bigger at that point would be to become a global brand, and Yahoo! can help it do that.

Right now Comcast itself is valued at just south of $130 billion, and Yahoo! is valued at $35.8 billion. It sounds like a lift, but most of that value lies in Yahoo's Alibaba stake, and most of this deal would be done in stock. The value of that stake will hit a ceiling once Alibaba itself is priced for the public market.

Comcast could easily sell most of that stake to get its money back, perhaps through an insider deal that would get it a seat on the Alibaba board. This would give Comcast an insider's view of Alibaba's march into the U.S., and thus help bring it into the e-commerce market.

All these niches - online news, finance, sports and tech, mail, search, shopping, cloud - are areas where Comcast has tried to follow in the last several years, but failed. Comcast cable users don't hang around on Comcast web pages.

Comcast's success is based on vertical integration. It owns NBC Universal, and when an NBC cable network collects fees for carriage Comcast writes checks to itself. Comcast knows that more-and-more people are cutting their cable cords but retaining their broadband Internet connections.

Yahoo! would give Comcast vertical integration on Internet content.

What would Yahoo! get?

For starters, it would get access to Comcast's capital to improve its search experience, to improve its own video offerings, and to deliver a better cloud. Comcast's deep pockets could bring Yahoo! into the business cloud market, if not directly against Amazon (AMZN) and Google (GOOG), then at least against Hewlett-Packard (HPQ) and other second-tier cloud players.

Yahoo! would give Comcast a global footprint, and a global market through which Comcast would sell its video offerings, not as cable but as Yahoo! Internet video.

More important, Yahoo would bring Comcast Marissa Mayer. Mayer may not be the world's best tech executive, but she's not stupid, she knows how to do celebrity, she understands Silicon Valley and she could become a Mark Hurd (COO and heir-apparent at Oracle (ORCL)) next to Comcast CEO Brian Roberts' Larry Ellison (aging billionaire CEO and tech legend). Mayer is 38, a baby in CEO terms, while Roberts is 54.

In other words, just about everything fits. Yahoo! under Mayer has been reaching deep into the world of media, where Comcast has a dominant place. To keep growing Comcast needs a tech base, which Yahoo provides.

It's sort of like Fred Astaire and Ginger Rogers. Comcast gives Yahoo! Wall Street class and gravitas, while Yahoo! makes Comcast sexy.

As tech price-to-earnings multiples continue to come down to Earth (and Yahoo!'s is now just 28, against 19 for Comcast) this deal sounds less-and-less crazy.

At the time of publication the author owned shares of AMZN, GOOG, CMCSA and YHOO.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

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