As Yahoo (NSDQ: YHOO) ponders various strategies for rejecting Microsoft (NSDQ: MSFT), Times Online reports that one possible option is a merger with AOL (NYSE: TWX). It’s not clear though if the company is serious about pursuing this, or if it’s just one of many ideas jotted down on the white board in the Yahoo boardroom. Rumors of such a deal have been floated in the past, though with Yahoo in the fight for its corporate life and Time Warner clearly interested in changes at AOL, it’s not surprising that this would percolate back up now. Note that Time Warner has officially stated its intention to jettison the remaining AOL access business, so any deal would only involve the online assets. Still, it’s not clear how such a tie-up would solve the fundamental problem facing Yahoo’s board: providing an alternative that offers shareholders as much value as Microsoft does. The same question goes for the rumored Google (NSDQ: GOOG) alliance. How does Yahoo tell shareholders that it’s rejecting an offer and that instead it’s buying out AOL?

Meanwhile, we still don’t really know how Time Warner feels about AOL. Yes, it said it would be splitting off the access business, but when people debate the value of this unit, the future of the access business isn’t the interesting part. Perhaps Time Warner will privately arrive at the same place IAC (NSDQ: IACI) has arrived at publicly, that a tie-up between Yahoo and Microsoft presents an opportunity to move forward while two big rivals are caught in a holding pattern.

Rafat adds: According to some Time Warner execs I have spoken to recently, who are familiar with new CEO Jeff Bewkes’ thinking, any moves on AOL’s part right now are unlikely. AOL sees an opportunity with all this confusion and consolidation: if the MSFT-YHOO deal goes through, the two would be locked in the throes of integration for at least a year...that’s on top of the year it would take to get the deal completed, if not more. Google will be locked in the throes of competition with the combination, and if anything, this would create an opportunity for AOL to consolidate its online ad platform and position in ad industry. Of course, this could all change for the right deal...the wind’s moving too fast.

• TWX CEO Bewkes: AOL Will Split Access From Ads, Audience; Will Make TWC Decision By End Of April
• Diller: Split Plans On Schedule; No Interest In Pre-Split Sales; MSFT-YHOO Good For Ask
• Yahoo Bid For AOL Rumors Start To Swirl