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[Ulisses Pereira]

"Yahoo!'s Still Too Risky to Buy"

By Jim Cramer
RealMoney.com Columnist
10/27/2006 9:30 AM EDT

"Yahoo!'s (YHOO - commentary - Cramer's Take - Rating) back to where it was before it reported the abysmal quarter. That makes it more likely that Yahoo! is Microsoft (MSFT - commentary - Cramer's Take - Rating) at $24, when Mister Softee said that business was not so hot and Vista had been delayed.

No doubt about it, Yahoo!'s been one of the worst stocks I have ever seen. The only thing that rivals its poor execution is its smugness. The company has failed to deliver on dozens of metrics and while the top management is steady, the place has become turnover city.

Now, after listening to the Comcast (CMCSA - commentary - Cramer's Take - Rating) call and reading the Microsoft notes, I find it hard to believe that Yahoo! will stay independent. Microsoft reported just an abysmal Internet number, reminding all that it just missed the Net. Comcast didn't rule out buying Yahoo! -- it was mentioned directly -- but I have to believe that someone has considered it.

Oddly, Time Warner (TWX - commentary - Cramer's Take - Rating) would be a good fit, if only to try to salvage something from its disastrous AOL buy. There could be some nifty synergies there. IAC/InterActiveCorp (IACI - commentary - Cramer's Take - Rating) could use some oomph, too, and if Yahoo!'s delayed search engine Panama was close to ready, those companies would be a match.

Then again, during this horrible downturn Yahoo! has had a nasty habit of going up somewhat after bad news only to go back down even harder than before when managers open their traps again.

I own Yahoo! for Action Alerts PLUS and I don't trust it as far as I can throw it. But even after the miserable numbers, this stock has scarcity value, like eBay (EBAY - commentary - Cramer's Take - Rating) and Amazon (AMZN - commentary - Cramer's Take - Rating), which make them all palatable despite their woes.

Bottom line: Yahoo! may have bottomed, it could be taken over, but it is still too risky to buy given its sorry track record and no change at the top. Yahoo!'s another company without a board of directors -- or at least, one with a faint pulse -- so given that lack of a role, Terry Semel and Sue Decker are going to stay. So you can't get invested.


At the time of publication, Cramer was long Yahoo!. "