Net loss: Stock balk for Yahoo

Analysts mull AOL buyout as shares flirt with 52-week low

Yahoo shares fell below the $20 mark during Tuesday's first trading session of the second half of the year, while a team of influential analysts suggested that a takeover of AOL could make sense for the Internet giant.

Yahoo shares fell as low as $19.59 before closing down 2.2% at $20.20. That gave the company a market value of $27.79 billion, according to Bloomberg. The stock hadn't traded below $20 since a $31-per-share buyout offer by software giant Microsoft first became public Feb. 1.

Tuesday's decline moved shares of Yahoo -- whose shareholders will vote next month on a slate of board members proposed by management and a competing slate nominated by dissident shareholder Carl Icahn -- closer to their 52-week low of $18.58, which it hit Jan. 30.

Meanwhile, Citigroup Global Markets released a report dated Friday in which analysts Jason Bazinet and Mark Mahaney called an acquisition of Time Warner's AOL by Yahoo a possibility.

Among the key advantages to such a deal, they cited $900 million in annual synergies -- mainly driven by cost savings -- Yahoo's "clear interest in remaining independent" and the chance for TW to gain Internet scale via a passive stake in the merged entity.

Bazinet estimated that AOL could fetch a price tag of $8 billion-$12 billion, thereby creating 33 cents-$3.45 per TW share in upside value potential.

In December 2005, Google bought a 5% stake in AOL for $1 billion, thereby valuing all of AOL at $20 billion.

For Yahoo's stock, an AOL deal would be mixed, with investors' reaction likely to be "muted," the Citi analysts argued. "Share of synergies could be worth between 74 cents and $3.06 per Yahoo share," they said. "However, (the) transaction would likely remove any remaining Microsoft-inspired M&A premium (of about $2 per share)."

Meanwhile, Yahoo has its hands full trying to get antitrust regulators to sign off on its pact with Google. The partnership, if approved, would have Google deliver advertising to searches made on Yahoo.

That deal could provide Yahoo with as much as $450 million in additional operating cash flow and help prove to investors that Yahoo's claims of being undervalued by Microsoft are accurate.

Georg Szalai reported from New York; Paul Bond reported from Los Angeles.