Good-news chatter on Yahoo! means you should buy Google

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How do you play Yahoo! (NASDAQ: YHOO) here? How do you play the takeover chatter and the earnings chatter -- the so-called better-than-expected coming?

I would play it with Google (NASDAQ: GOOG). The story on Yahoo!, from Pacific Crest, is an earnings story, the price of search going up -- at least that's how people are talking about the positive call. Believe me, if pricing is going up for Yahoo!, it must be soaring for Google.

Now, I also believe that Google's hiring has slowed and the company is getting more rational. The departure of George Reyes as CFO might help, as he seemed to have no check whatsoever on the gross margins and head count. With revenue up and expenses even flat, you are going to have a monster hit with Google, which never really got crushed, even though the shorts told me over and over again that the quarter was awful.

As for the takeover chatter for Yahoo!? Now that eBay (NASDAQ: EBAY) has moved up a great bit, a deal for Yahoo! makes a lot more sense than it did at $32 for EBAY and $30 for Yahoo!. Plus Yahoo! has all of that cash and securities on the balance sheet, which could translate into $11 a share.

Should they do it? Yes. Will they do it? I think they are finally on a roll, why muck it up?

So, bottom line -- the way to play Yahoo! is Google!

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Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. At the time of publication, Cramer had no positions in any of the stocks mentioned.