Tickers in this Article: YHOO, GOOG, MSFT, NWS
The latest news that top execs at Yahoo (Nasdaq:YHOO) continue to jam the exit turnstiles as they leave the struggling internet search firm could be a sign that major changes are on the horizon.

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While the latest round of defections, which includes U.S. head Hilary Schneider, may be seen as further evidence that the company remains unfocused nearly two years after CEO Carol Bartz took the helm, this apparent crisis of confidence in the executive suite could trigger a move by a possible suitor.

One possible bidder could be News Corp (Nasdaq:NWS). After watching its hopes for its social networking site MySpace fizzle as it became quickly eclipsed by Facebook, News Corp could be keen to boost its on-line presence with another, more weighty, acquisition in the Internet space. And Yahoo could fit the bill.

Undervalued Asian Assets Worth More Sold
While it may have lost the battle for supremacy in the on-line search business to rival Google (Nasdaq:GOOG), any bidder for Yahoo would be attracted to the significant value of its Asian assets. These assets do not appear to be adequately valued in Yahoo's current share price.

These holdings, which include a 34% stake in Yahoo Japan as well as a 40% stake in Chinese Internet leader Alibaba.com, which owns Taobao and Alipay, China's equivalent to eBay and PayPal, could be worth as much as $15 billion, slightly under the total market cap held by Yahoo. Any prospective suitor for Yahoo, if successful, could sell off these assets, thus financing a sizable portion of the total acquisition price.

Even if a bid doesn't materialize, Yahoo could be motivated to sell off these assets on its own. There is increasing friction with its Chinese partner, and analysts don't see much of a fit with Yahoo's core business. Any cash raised from a sale could wind up going back into the hands of Yahoo's long suffering shareholders in the form of a special dividend.

Last Year's Microsoft Search Deal Should Now Start Paying Off
In the meantime, Yahoo's bottom line stands to benefit from the cost savings associated with its decision to farm-out its search business to Microsoft (Nasdaq:MSFT) last year. The deal also allows Microsoft and Yahoo to retain the 30% share of the search advertising market that Google hasn't already gobbled up. It also gives Yahoo the opportunity to shift its focus to what it apparently does well - producing Web media sites and providing news content.

The Bottom Line
In an on-line world increasingly dominated by the social networking model so successfully implemented by Facebook, Yahoo's near term prospects increasingly hinge on its ability to provide fresh content in a compelling format. Securing such a position could be accomplished with or without the intervention of a possible suitor. In either case, however, the sale of its Asian assets looks to be a much needed rationalization move toward that eventual goal. (As social networking continues to gain international acceptance, Facebook will continue to grow. To learn more, refer to Facebook Surpasses Google.)

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