Apple-Yahoo Partnership - Can It Work?

Here's a fun thought:  Apple buying Yahoo.  Here's the thing. Apple won't have to offer Yahoo the premium Microsoft was paying for.  After all, Apple stock has a better upside potential than Microsoft at this moment with the iPhone sales leading the way and Macbooks flying off the shelves.  Essentially, Apple would be saying to Yahoo, "we'll buy you with a small premium and you'll be very thankful for it later".

With Android now a competitor to Apple's mobile platform, despite bloggers love using products from both companies (myself included) who try to walk a fine line on that matter in their posts, Google and Apple are on a potential collision course for mobile supremacy.

Now, Yahoo doesn't want to go under Redmond's sphere of influence.  It'll tolerate Google.  But I think the ranks and files of Yahoo would be very excited about a change of leadership to Cupertino.  Of course, this is only a speculative scenario on my part.

However, if Apple wanted to pull the trigger on this, it has the resources to make this work.  Some stock exchange and cash from the $25 billion war-chest can make it happen (I think they're adding like $2 billion of cash a quarter).  So, say that happens, then what?

• Yahoo gains the Apple culture and innovative energy.  Yahoo never had a swagger but it'll get one.
• Yahoo has hundreds of millions of users.  Apple would love to introduce them to its brand and products.  The massive ecosystem for the iTunes and Apple's mobile products, iPhone and iPods, would allow Apple to solidify it's hold on the mobile market.
• Apple will gain search.  If relations between Google and Apple does sour, Apple will have an alternative route to go to.  

Here are some things that will prevent such a partnership from working out:

• Apple will have to work with competitors.  Yahoo's services are popular among mobile users but will have to compete on Nokia and Samsung phones with iPhone but work with them to get Yahoo's mobile services on their phone.
• Too much baggage.  
• This is something too big for Jobs and company to absorb.  Remember when Apple bought Jobs out to bring him back and after he became CEO?  Remember what happened to your Newton? 
• Apple's purchases are targeted.  Filling its needs and holes.  Apple might be interested in a small search outfit or mobile ad startup that meet its needs to compete with Google if needed but Yahoo has too much of what Apple doesn't need. 

However, if it does work out, can you imagine the awesome new power of an Apple-Yahoo?  Apple would be able to offer a complete life solution of hardware, software, and cloud computing all in your Mac, iPhone, or iPod.  That is exactly what Apple is trying to offer now with Mobile Me, except, you know, so far, they suck at it.  

But if Mobile Me does get better by the end of the year as Jobs promised, Apple would still have an incomplete solution to compete with Google if relations break down between the two (no search engine of their own being the most important component).  Maybe there won't be war between Apple and Google.  However, an Apple-Yahoo done right could be Google and Microsoft's worst nightmares.

Anyway, it's fun to consider on a Friday.

Note:  At the financial call, Jobs did say Apple could be using its massive cash to hire every talented engineer in the Silicon Valley.  So, the statement kind of stuck with me all week.  I can't shake the feeling that the dude was dropping a hint and, yet, was laughing how we have no idea what Apple has up its sleeves.