What this means is that the numbers two and three on the search engine market are merging their efforts in order to better fight with Google‘s supremacy on the search engine market. However, the deal also means that a compromised has been reached between the two companies, a compromise that allows Yahoo! to avoid being bought out by Microsoft (a deal that was considered like a rape by many business analysts), while in the same time saving its ass from a financial failure based on the money that Microsoft is actually putting in through this deal.
However, as Radu Georgescu mentions, through this deal Yahoo! gives up its core technology, their very first competitive advantage in the beginning of the Internet age. In a sense, giving up their core technology makes them dependent on Microsoft (at least for 10 years, in theory, but in fact it could be forever) and makes their long term strategy a pretty uncertain one.
Radu considers that the whole reason why this deal took place today was because of the sentimentalism of Yahoo!’s owner, Jerry Yang. He could have exited with glory six months before the crisis, when he had a pretty good deal from Microsoft, but he refused, failed another deal with Google and eventually the shareholders pushed him out of his own company.
In his place as a CEO, the outsider Carol Bartz did what had to be done, all feelings left aside. “Only a Yahoo outsider like Ms Bartz could do such a deal” said Tim Weber, business editor of the BBC News website. “She has no sentimental attachment to what was once the core of Yahoo, its search business.” (BBC article)
For a short timeline of Microsoft and Yahoo! deal, check out this BBC article.