Having announced a 10 percent reduction in its workforce that will result in about 1,500 layoffs, Yahoo is reportedly squirreling away cash for a possible acquisition of AOL.

Yahoo has long been rumored as a suitor for AOL, the possibility seemed to gain momentum after a comment yesterday from Blake Jorgensen, Yahoo's CFO. Jorgensen said Yahoo would be conserving cash to "allow us to do some of the things we may be looking at." 

While a merger or acquisition may still be a long way off, the deal is said to be largely about display advertising. Yahoo combined with AOL would have a commanding position in the display market. However, it's not clear what the value of that position would be given the decline in spending on display.