There was lots of chatter this morning about the possibility that Microsoft is negotiating to buy Yahoo’s search business. But the latest rumor is sure to set the internet ablaze with speculation—people are saying that after inking the deal with Yahoo, Microsoft will turn around and buy internet favorite Facebook.

“What a move this makes. Yahoo gets everyone off their back, Microsoft gets a credible position in search, and buys Facebook to compete with Google,” Furrier.org writes. “The price about $45 billion.”

Silicon Valley Rumor: Microsoft to Buy Yahoo Search and Then Facebook [Furrier.org]

The key to Yahoo! chief Jerry Yang’s apparently successful attempt to avoid being Microserfed was the threat to enter into a partnership with Google. Under the proposal, Yahoo! would outsource to Google important paid search terms, a move that struck many as all but admitting that Yahoo was incompetent at monetizing search terms and that seems to have driven away Microsoft’s Steve Ballmer.

It was a cagey move but is it legal? Can the management of a public company targeted for opposition adopt a perhaps suicidal business plan to drive away suitor? Maybe not. Although Delaware courts—which, for quirky federalist reasons, get to decide these things—give companies broad leeway to undertake defensive measures, there are supposed to be limits to this sort of thing. Stephen Bainbridge, one of our favorite law professors, explains that Yang’s takeover defense might be acceptable to Delaware courts if he could prove it was part of Yahoo’s long-term business plan. But that seems implausible—everyone knows they came up with this as an ad-hoc defense.

If Microsoft really wanted to get hostile, they might have actually been able to get a Delaware court to stop Yahoo from running into the arms of Google.

Using a strategic partnership as a poison pill [Bainbridge]

Because he’s a genius—or maybe just one of the few remaining people not seduced by the idea of a site that refuses to put a cap on the amount of useless crap “applications” it will offer, none of which does anything to better facilitate the stalking/slaying of potential prey—Steve Ballmer said that he regards individual social networks as a “fad,” seemingly implying that Microsoft will not be making a $300-500 million investment in Facebook (for a 5% stake that would place the company’s value at around $10 billion). (You have Christ, we have wishful thinking.)

“I think these things [social networks] are going to have some legs, and yet there’s a faddishness, a faddish nature about anything that basically appeals to younger people,” Ballmer told Times Online. Though he acknowledged some vague potential value in Facebook’s 40 million users, he noted that “There can’t be any more deep technology in Facebook than what dozens of people could write in a couple of years,” a point that makes the valuation Zucks (claims not to be but probably) is seeking, for a site expected to achieve revenues of only $150 million this year, what’s the word? Insane. (Ridiculous. Dumb. Adidas shower shoes. Etc.)

Ballmer also, somewhat awesomely, added that sites like Geocities “had most of what Facebook has” years ago (and without the personification-of-a-smug-twat grin). He did not comment on why Mark Zuckerberg was seen in Seattle last week (a spotting that fueled speculation about a Microsoft investment). However, the tone of his voice seemed to hint at a combination of a. (“Bryan Adams with George Thorogood concert at the WaMu theater”) and e. (“Annual pilgrimage to Brandon Lee’s grave in Lake View Cemetery”).

Earlier: Cutting The FaceBook/Microsoft Deal Rumor Off At The Knees

Ballmer: Facebook risks being ‘a fad’ [Times Online]

Bear Stearns, trying to deflect attention from its own woes, re-sparked Yacrosoft speculation, after it was re-sparked last May. Bear Stearns analyst Robert Peck wrote in a letter to clients that he thinks Microsoft “continues to evaluate Yahoo as a target,” and that a potential bid could fetch a $50 per share price tag - currently double Yahoo’s current share price. Bear set a price target of $30 per share on its latest Yahoo report.

Yahoo (Nasdaq: YHOO) is up more than 5% today at $23.96 a share.

UPDATE 2-RESEARCH ALERT-Bear Stearns names Yahoo as top pick [Reuters via DealBook]

Due to “quality issues,” Microsoft won’t release Office 2007 on Macs until 2008, instead of the second half of 2007 as originally promised. By quality issues Microsoft means issues with Mac’s growing market share and continued attempts to try and jumpstart Vista sales. That, or it’s displaced anger over entering the portable music market and still getting teased about the Zune.

Microsoft is also holding out on the eventual price point, saying that the new Mac Office will cost somewhere between a PS3 and something else you don’t want to buy.

What Microsoft doesn’t realize is that it is encouraging users to make the switch to Macs. After all, the Office 2007 suite is a resource hogging, 50% prettier and 50% less functional version of its predecessor. Microsoft prepares you for this frustration right off the bat, putting the new Office in an un-openable package (pictured, and it took the DB offices at least 10 minutes and three steam powered drills to get that thing open). Empowered by the knowledge that business managers can’t upgrade, users know there has never been a better time to switch to a Mac.

Mac version sales make up about a fifth of total Office sales, up from about 4% in 2001.

Microsoft assures us that one visit to the Genius Bar in the Apple store is a quick remedy to a Mac buying impulse (wait, you’re a “genius” because you live in Williamsburg and can’t fix my computer?). Personally, we’re still waiting for Apple to invent the right-click on their mice.

Microsoft Delays Office for Mac Release [amNewYork]

Tech mentor to the stars (of Silicon Valley) Jim Gray is still missing after drifting off in late January to release his mother’s ashes on the Farallon Islands 27-miles off the San Francisco coastline. The latest issue of Wired takes us inside the man, the myth, and not so much the model of a modern major general.

The story of the high-tech hunt and Gray’s emergence as a programming legend is fascinating and all, but what really gets us is how programming gods delve into the mortal realm to pick up chicks. Hot Scandinavian chicks. The key – Lord of the Rings, proving that once a programming geek, always a programming geek, from Wired:

In 1984, [Gray] met Carnes, an articulate Norwegian-American beauty with master’s degrees in history and education. An avid sailor and hiker, she accepted his proposal on their third date — on his boat, of course. She became an engineering manager in the Valley, and they spent their vacations sailing and reading Tolkien aloud to each other in the wilderness. When they bought the house on Telegraph Hill, they christened their nautically themed bedroom Gondor — the realm of the Ship-Kings. Courtesy Joel Bartlett

“I fell head over heels in love,” Carnes says. “We’d both been married before, but we met our match in each other. He was intense, I was intense, and we were both raised by single parents. Jim was like a mountain man who was also a brilliant scientist.” She liked to call him Mr. Database.

Of course, it helps when “Mr. Database” has untold millions to throw around. What’s elfish for “sugar daddy?”

Inside the High-Tech Hunt for a Missing Silicon Valley Legend [Wired]

Although Pearson PLC is being called a possible ‘white knight’ bidder for Dow Jones & Co, many in the newsroom of the Wall Street Journal are not enthusiastic about being bought by the publisher of the Financial Times. Reporters at the Wall Street Journal, many of whom regard the Financial Times as an inferior paper with low-quality “Brit journo” standards of fact-checking and sourcing, are worried that ownership by Pearson will deteriorate journalistic standards at the paper, a source at the Journal told DealBreaker.

“I took a straw poll around the office. A lot of people are worried about what this will do to the Journal’s reporting,” the source said.

Word began to circulate late on Friday afternoon that General Electric and Financial Times publisher Pearson were “in talks” about a potential joint offer for Dow Jones & Co. Over the weekend, the story ran in the Financial Times, the Wall Street Journal and the New York Times. A decision on whether or not to make a bid is expected to come within days.

A news of a possible bid from Pearson and General Electric may have the ironic effect of making the bid from News Corp more attractive. While News Corp chairman Rupert Murdoch has promised to spend more on the Wall Street Journal, expand its international presence and has announced plans to launch a new cable news network for financial news that may give Journal reporters more outlets for their reporting, a bid from Pearson and General Electric would likely involve mostly cost-cutting synergies.

[After the jump, the not-exactly-surprising news that Journal reporters aren’t totally psyched about working for the publishers of the Financial Times.]

Steve Jobs announced yesterday that Apple is going to release a new version of its Safari web browser that runs on Windows. The free downloadable test Windows version of Safari on Apple’s website is still laden with glitches, according to initial Wall Street Journal reports. Safari commands 5% of the web browser market, lagging well behind Internet Explorer (78%) and Firefox (15%).

The other developer creamcicle-worthy announcement made by Jobs is that Apple plans on letting programmers create software for the iPhone, although through the iPhone’s version of the Safari browser.

Even though Apple has everyone on Safari, it doesn’t want you to see the Leopards. Jobs announced that Apple will delay the launch the Leopard OS for Macintosh until October. The Leopard was originally scheduled to be unleashed this month.

Apple to Move Deeper Into Microsoft Turf With Windows Browser [Wall Street Journal]

We touched on this story in Opening Bell so we won’t spill too many pixels on it now. Suffice to say, we’d all heard that General Electric was looking for a partner to buy Dow Jones and defend its CNBC property against the challenge of a Fox Business Network-Wall Street Journal combination. But we didn’t think much of it.

Sure, Microsoft was a natural partner, having built MSNBC with GE. And while Microsoft isn’t eager to become a newspaper publisher, maybe they’d want to get in on Dow Jones strong web presence. They used to have a taste for this sort thing, right? Until very recently, CNBC’s entire web presence was tucked away in a little corner of Microsoft’s MSN.

But that was then. This is web 2.0. The big players in the internet space aren’t so enthusiastic about creating content these days. And certainly not for paying people to create content. It’s all “user-generated” and “social networking” all the time—think MySpace, YouTube, and even Last.fm. Even CBS’s purchase of WallStrip might morph into something more sophisticated if they let a million WallStrips bloom and do for finance user-videos what FunnyOrDie is doing for comedy. Microsoft has the cash but not the desire to own Dow Jones.

The implausibility of all the “competing” deals that are currently “on the table”—none of which have actually gone through the trouble of being competitive with News Corp’s $5 billion bid and which are not actually on any tables—actually make Murdoch’s bid more likely to succeed. The Bancrofts, having very publicly declared a willingness to sell, must now look around and wonder: is that it? And, yes, it seems that it is. Last week we had Murdoch at 80%. At the start of this week, post-Microbalk, he’s reach 85%.

Google, the company that’s trying to catalog every word that’s ever been bound, reads your email to provide advertisements and doesn’t have a problem with displaying the street-level view picture of 44th and 8th just as you were walking into Peep World to ask directions (what are the odds!) on its site, draws the line at an operating system’s ability to scan your hard drive.

Google wrote a 50-page antitrust love letter to the Justice Department outlining how Windows Vista looks at all the porn on your computer through its desktop search feature. Google also has some problems with Vista’s destroy Google “integrated search” customization and the indexing of desktop files. Google’s specific complaints, from the Wall Street Journal:

In its April white paper, Google alleged that Microsoft didn’t allow search bars in Vista that consumers can use to initiate searches to work with desktop-search software other than Microsoft’s, said lawyers familiar with the matter. In addition, Google argued it was practically impossible for consumers to turn off the indexing feature of Microsoft desktop-search software that catalogs users’ files, which meant a computer’s performance was slowed down if it used a second desktop-search application.

Google has a long history of getting bored enough to try and cause some legal troubles for Microsoft, usually by taking the antitrust angle. Last year Google claimed that Microsoft was pushing its web search feature by using its influence in the over the browser software market to the detriment of competitors. Microsoft doesn’t plan to do anything about any of this, as Google continues to plan “the invasion” phase of its business plan.

Google Intensifies Microsoft Fight [Wall Street Journal]

Officially it’s being called an 85% premium from where the stock traded yesterday. But since aQuantive’s shares were trading below $30 a few short months ago—before Google’s acquisition of DoubleClick started a frenzy of speculation about who Microsoft might acquire to get into the internet advertising business—it might be fair to say that the premium is closer to 105%.

Any way you look at the numbers is mind boggling. It’s ten times sales. It’s 45 times cash flow. It’s $6 billion.

It’s hard to make sense of this deal except to look at it through the eyes of Don Lapre.

That’s right. That Don Lapre. The man who brought us the Money making System and taught us all how we were going to get rich. Three words: Tiny classified ads.

His earnest enthusiasm provided a lot of laughs around the dorm room but the campaign also brought him a lot of criticism from those who thought his multi-level marketing plans were pyramid schemes or scams designed to separate the gullible from their money.

As it turns out, Don Lapre was just ahead of his time.

Microsoft snaps up aQuantive for $6 billion [MarketWatch]

Microsoft and Yahoo, seen hanging out at Bungalow 8 several times last year (according to the New York Post), are rumored to be in merger talks once again. Spurred by a love of Latin sounding next-gen technological platforms (Vista for Microsoft, Panama for Yahoo), missed or failed acquisition opportunities (mainly by Yahoo with DoubleClick and Facebook) and a desire to do something to stay competitive with Google, the two companies are getting along much better than they used to. The initial dissolution of talks was caused partly by Microsoft online group managers insisting that the company stick with its own online search and ad systems rather than buy Yahoo. Many leaders of those projects are no longer with Microsoft.

Can this actually work or is this the AOL/Time Warner of this decade? Integration of the two companies could be a huge problem. Yahoo has 12,000 employees and a recently reshuffled corporate structure, with a co-founder (Jerry Yang) that is said to dislike Microsoft and actively avoid the use of Microsoft products.

Yahoo shares surged over 20% in after-hours trading yesterday, as the stock closed at just over $28 a share and now sits at over $34. This pushes the market cap of Yahoo to over $38bn. Microsoft’s market cap is closer to $300bn, and the company has about $28bn in cash and short term investments.

Microsoft, Yahoo Reconsider Merger - [WSJ]