Microsoft + Yahoo = Love For Ever ?

    $44.6 Billion. This is the cost of love, and MS loves yahoo. But is this a match made in heaven? (or should i say a match made in desperation?). In any case Microsoft's love for Yahoo! certainly made the news worldwide. On Feb. 1, the software giant took its most bold step yet, announcing an unsolicited $44.6 billion bid for online rival Yahoo!.
    This declaration of love however should not come as a surprise. Microsoft was circling yahoo since 2006. In mid-2007 rumors of a merger started to appear on the horizon. arstechnica.com had raported back in May: "Microsoft and Yahoo have seen their search market share fail while watching Google's continue to climb. Google also continues to flex its advertising muscles, kicking sand in the faces of its competitors with the recent acquisition of DoubleClick.  Adding insult to injury, DoubleClick may have turned down a more lucrative offer from Microsoft before being purchased by Google. From a strategic standpoint, then, some sort of Microsoft-Yahoo alliance makes sense. An outright acquisition of Yahoo by Microsoft is almost certainly out of the question, however. Yahoo has a market cap of $44.98 billion and Microsoft has never come remotely close to spending that much on an acquisition. Some sort of stock-cash combination is plausible, but also unlikely."
   
So Microsoft has popped the question, should Yahoo! say yes?

    Both companies are in a difficult position. Microsoft has spent more than $10 billion trying to build its Web business. But despite its best efforts, Google's grasp on the web ad business became even tighter; Google accounted for 56.3% of all Web searches in December, compared with a combined 31.5% for Microsoft and Yahoo, according to Nielsen Online. For Microsoft, this is a desperate attempt to catch Google while it still can, as Steve Ballmer admits: "We're in this game, and we're going to be in this game. But the market leader is getting stronger."
    Yahoo! is in a even worse position. On Jan. 29, Yahoo issued another disappointing quarterly report and an even more troubling outlook, anouncing 1,000 job cuts and sending the stock price down the drain at   its lowest level in four years.
    So the answer to this marriage proposal should be yes, especially when it is accompanied by such a shiny ring ($44.6 Billion). But this marriage wont be an easy process. If Microsoft can smoothly mesh Yahoo into its MSN and Windows Live Internet businesses, it could create a network that approaches Google's size. But that's a big IF. Ballmer and Co will need to sort out the brands and the websites, which by itself is no easy task and will probably take years. The biggest challenge this marriage will face is cultural. Yahoo's 14,300 employees come largely from the Silicon Valley world that loves to hate Microsoft.
    What remains to be seen is whether Yahoo! will say "I do!" or will it play hard to get by getting in bed with a cable TV company like Comcast or a media company like News Corp, or even seeking an alliance with Google in which its rival would run its search and ad businesses, a strategy some analysts had suggested even before the Microsoft bid (BusinessWeek.com).