FORTUNE -- Yahoo's earnings report, released Tuesday, shows that the company is running out of options. The consensus among analysts and the commentariat seems to be that the company has to make some kind of big move. The problem there is, the only big move anyone can think of is for Yahoo (yhoo) to buy the video-streaming site Hulu, which it is reportedly trying to do. That would be a very expensive, highly uncertain gamble.
Bloomberg News reported this week that Hulu's owners – Comcast (cmcsa), News Corp. (nwsa)., Disney (dis) and Providence Equity Partners – have informed bidders that they will continue to provide content to Hulu for five years. The commitment is exclusive for two years, except that the TV networks would be allowed to stream shows on their own sites as well.
Even with such a commitment in place, it's not clear that Yahoo would be able to earn a return on its investment sufficient to make an acquisition worthwhile, much less to turn the whole company's fortunes around. After five years, content providers might start demanding much higher prices, or cut off access altogether. And in just two years, the networks can start licensing its shows to whomever it wants, which could cut deeply into Hulu's revenue.
Nobody knows what the market for television programming will look like in five months, much less five years. Hulu's valuation is difficult to determine, which is why after it announced last month it was up for sale, prices of between $1 billion and $2 billion have been reported. That's quite a range.
Although Microsoft has reportedly dropped out of the bidding, several companies with much stronger bargaining power, possibly including Google (goog) and AT&T (t), are said to be circling, as is Amazon (amzn). (The latter's position is uncertain given the news Wednesday that it reached a deal with CBS to run thousands of old shows owned by that network. Amazon might simply continue to build out its own streaming service.)
But let's assume the best possible conditions – that content-licensing costs somehow stay low for a good long while and that Yahoo somehow manages to scoop up Hulu for a relatively low price. Yahoo would still have to manage Hulu to succeed against competitors like Amazon and Netflix (nflx), and there's nothing to indicate that current management would be able to do that.
The main reason for Yahoo's soft quarter – one in a long procession of soft quarters – is that revenue from display ads rose just 5 percent. That's a market that Yahoo once owned. Google and, increasingly, Facebook, are now top dogs in display ads. Why has Yahoo faltered? "We did not have enough salespeople in front of the big clients," explained CEO Carol Bartz, telling analysts during the earnings call that she's still working on reorganizing the sales team.
If Yahoo can't manage its core business at the most fundamental level, how can anyone expect that it will be able to manage an entirely new business?