Despite the fact that Microsoft (NSDQ: MSFT) has withdrawn its offer to buy Yahoo (NSDQ: YHOO), the M&A machinery on all sides is still in full gear, and expect tons of activity in the next couple of months. The $50 billion or so that Microsoft was willing to spend is the money that’s still around, at least on paper. So who will Microsoft buy to make that leap it so hoped for? Steve Ballmer hinted the readiness in his letter to Jerry Yang: “We will move forward and will continue to innovate and grow our business at Microsoft with the talented team we have in place and potentially through strategic transactions with other business partners.”

SEE ALSO: BREAKING:  Microsoft Withdraws Offer For Yahoo

Some possible combinations:
—One would have to believe that Facebook will be back in play. Microsoft is already the advertising provider for the social networking service, and also owns a small part in it. This would give it a strong toe-hold in the social media space and help it experiment more with new advertising models, among other things.
—Then, to block and isolate Yahoo further, AOL’s (NYSE: TWX) buyout would be a possibility. Time Warner is certainly interested in spinning it out, and is still speaking to Yahoo on a combination. Google (NSDQ: GOOG) is a 5 percent shareholder of AOL, so things might have to worked around that.
—Certainly, if Diller really wants to get rid of IAC’s (NSDQ: IACI) disparate companies in this spinoff, then Microsoft could be a ready buyer.
—Then other smaller possibility include CNET (NSDQ: CNET), though hard to see synergies between the two companies.
—Further down the money chain would be tons of other companies like Twitter, Digg, Meebo and any other $50 million to $500 million company.