In a letter to AOL employees yesterday, AOL CEO Randy Falco appeared to almost blatantly court some sort of merger or acquisition for his company. But Falco left AOL staff hanging in the breeze as to what kind of deal, he might strike, and with whom.

"I'm sure you've read some of the recent news speculating about potential AOL partnerships. While the company can't comment on any discussions at this time, I'd like to provide some perspective on the industry and AOL's position in the market," Falco wrote, in a letter sent out on the eve of a strategy meeting slated to take place today among Yahoo's directors.

"It's clear that the industry is in a state of extreme flux. Each day brings new rumored combinations of companies. But what's not surprising is AOL's appeal in this rapidly changing environment. The market is recognizing the value of what we've built together over the past year and a half, as we've shifted from a subscription model to an advertising-supported business," according to the memo, first unearthed by blogger Henry Blodget and published in the Silicon Alley Reporter.

Then -- ostensibly to boost employee morale, but also in a way seemingly calculated to point out AOL's value to potential suitors -- Falco went on to trumpet what he views as AOL's advantages in the areas of publishing, advertising, and social media.

"In the social media area, we're focused on empowering a truly social Web with programming and tools that help connect people, cultures, and lifestyles around the world. Bebo, together with AIM and ICQ, will create a social media network reaching 80 million people worldwide," he wrote in the letter.

But do AOL staffers really need to worry that their paychecks will start getting signed by anybody other than AOL's current owner, Time Warner, in the near future -- or worse, that some of them won't be receiving paychecks at all due to merger-induced layoffs?

The most likely outcome of today's meeting of Yahoo's directors is a Yahoo takeover by Microsoft, according to many observers.

"Microsoft remains the most motivated and best capitalized alternative for Yahoo," said Clay Moran, an analyst at Stanford Group Company, in a note to clients yesterday.

Meanwhile, Microsoft chief Steve Ballmer this week vowed to start a proxy battle in a couple of weeks if Yahoo's board doesn't knuckle under to Microsoft's demands.

In its continued attempt to fend off Microsoft's advances, however, Yahoo has been talking with AOL's owner, Time Warner, about a possible merger between Yahoo and AOL, according to reports in the Wall Street Journal.

Stanford's Moran, for one, doesn't put too much credence in a deal between Yahoo and AOL. "A Yahoo-AOL merger does not provide Yahoo shareholders value equivalent to the existing bid," Moran wrote.

Others, though, have raised additional possibilities. Charles DiBono, an analyst at Bernstein Research, has even proposed Microsoft as an AOL suitor, for instance.

As DiBono sees it, Microsoft might surmount Yahoo's opposition by "changing the game" and making a cash offer for AOL to Time Warner, thereby squashing any efforts by Yahoo to buy AOL. Also under this scenario, Microsoft would buy MySpace.

Although that's the alternative DiBono likes best, he also raises three other suggestions for Microsoft: offer a few more bucks per share to Yahoo investors; wait the requisite three weeks before deciding whether to start a proxy fight against Yahoo; or simply walk away from Yahoo.

But of all these possibilities, DiBono seems to like "walking away" the least -- since Microsoft would then remain in third place in the search business, while a combined AOL and Yahoo would be even tougher for Microsoft to beat in display ads.

"Strategically, that could be troublesome, and it's not even clear what tactical advantage Microsoft would gain from simply walking at this point," according to the Bernstein analyst.