Yahoo between a rock and a hedge

So Yahoo stock is off its low of 22.65, trading last I looked at 27.40. So Terry Semel, Yahoo's CEO, can breathe easy, right? Wrong. I'm hearing that much of the buying is from hedge funds, big and fickle investors who are expecting action of some sort. If they don't get it willingly, they'll start pushing. Here's what it might mean.

Yahoo needs to do a deal. Small add-on deals, such as the acquisition of Flickr and Delicious, won the internet media company some precious buzz. The Flickr founders made the cover of Newsweek in April.

But neither those deals, nor internal growth of units such as Yahoo News, have been enough to compete against Google. Panama, Yahoo's great search marketing project, is delayed. The final insult: Google snatching away Youtube, a deal that might have been given substance to Yahoo's claim to be a new kind of media company.

More on the deals that Yahoo could do — with Microsoft, AOL, Facebook or even, crazy idea, Google itself — in another post. For the moment, suffice to say that the recent rebound in the stock price does not reduce the pressure on Semel. The hedge funds have piled into the stock in anticipation of a deal. They are not long-term holders. Terry Semel may want to go out of Yahoo on a high note. These investors will not be moved by that desire.

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