The world of IT is becoming increasingly virtualized. Applications are ripped apart, deconstructed,  and broken into specific services that serve individuals on-demand in real time. It's much more difficult to forecast load balances on application servers and storage subsystems. New opportunities arise for companies to create analytical and monitoring software that enables IT managers to get a grip on a world that looks assymetric, stochastic, and in simple English, weird and confusing.

It seems that the flow of news has entered a similarly weird era, one that will stay with us forever more. Maybe the Internet really does change everything.

A case-in-point this week was the one-day Microsoft is buying Yahoo story. Although it broke in the very traditional "old media" Wall Street Journal, it quickly entered the house of mirrors that is the webosphere and blogosphere, and was quickly refuted. Or rather, quickly muted. After watching Yahoo's lagging stock surge 10 percent on the story, it behooved execs from both companies to say that if there were any talks, that these talks have now ended.

This was a virtual story with a virtual death. The story itself was never affirmed nor denied, and it flickered out before it had any traction. This was not a rumor, but it was also not a real story. There is a continuous stream of communications among technology companies large and small about who could potentially buy whom, what "synergies" may ensue, how strategies can be aligned, etc. Many restaurants in Silicon Valley and 100 other places would go out of business if they didn't serve as places for potential dealmakers to sit around, look important, and say important sounding stuff.

Some of the basics involving the potential Microsoft/Yahoo merger:

* Yahoo has a market cap north of $40 billion. This gives it a P/E ratio of 60.75, still very high by historical market standards. Yet shareholders have been screaming for months for CEO Terry Semel (pictured above) to take his already enormous feedings from the trough and head back to LA.

* Microsoft has about $34 billion in cash and short-term investments. Not that this deal would involve much if any cash, of course! But it's interesting to note that Yahoo's market cap exceeds even mighty Microsoft's ability to swallow it easily.

* Microsoft would get a company that has lots of traffic but an inability to monetize this traffic nearly as effectively as rival Google. (Yahoo's annual revenue is north of $6 billion, while Google has soared past $10 billion. Its much higher profitability compared to Yahoo gives it a market cap of $146 billion, or fully half of Microsoft, yet it's P/E ratio is 20 percent lower than that of Yahoo. Microsoft, which has become one of the big blue chips, has a staid old P/E in the 22 range.)

* Speaking of traffic numbers, Google has almost caught perennial number one Yahoo. One thought expressed during this week's virtual takoever story was that Microsoft's relatively weak traffic would be boosted by acquiring Yahoo's. Yet it turns out that MSN.com is now the number two site by some traffic measures. There are more metrics than measurements in the metric system (that's a pun, folks) with respect to Web traffic, but the question arises is how would Microsoft benefit by taking on what, by current industry standards, is an underperforming website company that has no natural "synergy" with Redmond?

I'll leave it to the PhD candidates to drill down into all the aspects of this question. And we can't rule out the possibility of an acquisition done on pure paranoia and hubris.

At least this story has some interesting aspects to it, virtual as it may be. By counter-example, I've been listening to straight-faced reporting of a $10 million bid on eBay for the original "General Lee" car from "The Dukes of Hazzard." By evening, the big had been withdrawn, surprise, surprise, yet the nattering nabobs of nonsensicalism continued to report this quark of a story as if it were a breakthrough in talks with North Korea.

It's a virtual news world...we just really live in it.