MONDAY UPDATE: We wondered last night what Wall Street would think of a combined IAC/Ask, and whether it would value the merged company more than the sum of its parts. Turns out, as of about 10am PST, after several hours of mulling over what the prospective merger really means for the two companies, the stock market thinks the combined entity is worth less than the sum of its parts — at least based on a superficial interpretation of today’s developments. Ask Jeeves’ stock may have jumped 15.80% today, but the much larger IAC’s stock price has dropped 3.59 percent, resulting in overall combined drop of $320 million in market value for the two companies.

InterActive Corp is about to acquire Ask Jeeves, the country’s fourth-ranked search engine, for $1.9 billion, according to the New York Times. The deal could be announced as early as tomorrow, the Times said.

This is a big deal: Ask Jeeves has trailed at a distant fourth, and never seemed to gain ground, despite its wily and nimble product offering and experimentation. Observers tend to talk about the race as a three-way one between Google, Yahoo and Microsoft. The market thought so too: Ask’s stock has fallen from as high as $44 per share last year to $22.24 on Friday, even as Yahoo has climbed from $21.74 a year ago to $31, and Google has rocketed to $180 from $95.

Barry Diller’s IAC has also struggled this year, seeing its own stock drop to $22.29 from as high as $34.62. IAC is an Internet conglomerate of sorts, owning properties like Expedia, Ticketmaster, Home Shopping Network and But its online CitySearch listings seems to be the most closely linked with search, as anyone who has searched Google for restaurants will know — the listings usually show up pretty high. So Diller, whose company is worth $15.58 billion in market value, probably asked himself: “Why not buy a cheap search engine (Ask is only worth $1.43 billion, compared to $49.23 billion for Google, or $43.16 billion for Yahoo), and try to get some synergies so I can stay in this game for the long haul?”

We’ll be curious to see what Wall Street thinks of this tomorrow. Specifically, will it value the whole (IAC/ASK) more than it does the sum of the parts?

PS. Meanwhile, the others aren’t waiting around. It’s official: Yahoo has acquired Flickr, a start-up that helps people make their photos available to their friends and family, via PCs, mobile devices, blogs, RSS feeds, you name it. (via Battelle)

UPDATE: The Wall Street Journal has a similar story (sub req), has more analysis, but said the exact details weren’t known as of tonight and that “the transaction still could fall apart at the last minute.”

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