Yahoo! (NASDAQ: YHOO) will be reporting earnings for the third quarter on Tuesday, October 21. The internet portal hasn't had a great year so far. According to data at Earnings.com, the company hasn't seen too much in the way of bottom-line growth. And the stock is, as of this writing, at the low end of its 52-week range. Of course, just about all stocks are having a rough time this year. Then again, Yahoo! could have avoided all this misery and just allowed itself to become assimilated into the Microsoft (NASDAQ: MSFT) culture. Poor CEO Jerry Yang. What was he thinking?

The call is for Yahoo! to post at least $0.09 per share for the bottom line. It would be nice if management could go beyond those expectations, since the company posted $0.11 per share in the year-ago period. Yahoo! really needs to show the market that it can stay relevant and keep up with the likes of Google (NASDAQ: GOOG) and Time Warner's (NYSE: TWX) AOL. Google recently booked a quarter that went well beyond the thinking of analysts. Yahoo! has a relatively decent history of beating earnings expectations, but it did miss the call last quarter, according to AOL Finance. So there's going to be a lot of pressure on Yang to perform.

Of course, let's be honest. The earnings, in the big picture, don't really matter. Yahoo! is essentially, in the minds of many, still an arbitrage play. In fact, Tobias Buckell recently commented on this subject. There are a lot of investors out there who would like to see Microsoft CEO Steve Ballmer come back to the table to begin a new round of negotiations for a takeover of the portal. I, for one, wouldn't want to see that. Does Microsoft really need the headache of integrating the web company's brand assets with its own? No. However, looking at it from the perspective of a Yahoo! shareholder, I obviously see why a buyout would be attractive. That might be the only way for the stock to command any premium these days.

Tobias Buckell recently wrote a piece pointing out that a recent ABI Research survey touted that some 58% of iPod users would consider a switch to a Microsoft Corporation (NASDAQ:MSFT) Zune within the next 12 months. One of obvious reasons for this is the larger screen, but Zune's social networking will also clearly send a message to Apple users. Zune's social networking will be based in Zune Marketplace, which is equivalent of iTunes and songs can also be shared via wireless technology on the Zune device.

Today, social networking is vital. Last week I was interviewed by the Globe and one of my key emphasis points was that whether it is blogs, Facebook or MySpace, people are starting to use technology to not only expose themselves, but also to share their views and opinions. I think Microsoft's understanding of this change, which is apparent in Zune, will give the company a differentiating edge.

By no means am I saying that Zune will take over the iPod, because it certainly won't, but it will definitely put forth another trendy alternative -- one that Apple in turn may mimic. Also don't forget about Microsoft's reported $100 million ad campaign for Zune, featuring the tag-line "welcome to the social," which I am sure will have a great impact!

(Listen up Apple, nobody thought the Republicans could be toppled either.)