Squali, the analyst at Jefferies & Co, said some sort of deal with Microsoft now seemed inevitable.
He said it was unlikely that Yahoo could grow organically and deliver high profit margins. "(It's) not in the picture right now," he said.
Yahoo could have gotten cash by selling its Asian assets, but Squali said it was unlikely given the state of the capital markets.
Needham & Co analyst Mark May said Yahoo remaining independent was the "worst possible scenario" for the company.
Sources have told Reuters that Yahoo is in talks about buying the content and advertising operations of Time Warner Inc's AOL unit.
Epaper
Newsletter
Stocks
Weather
Horoscope
