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The prevailing wisdom is that Yahoo’s stock hasn’t totally cratered because Microsoft is simply being coy, and will inevitably be back after shareholders have made Yahoo management a little more pliable.

Personally, I’m not in that camp.  I think Yahoo fought so hard that Microsoft now views them as incompatible.  So what’s next in the Microsoft-Yahoo-Google love triangle?

Mike Arrington thinks Microsoft is just playing possum.  He writes recently of Gates’ apparent about face on strategy where he is no saying there’ll be no major acquisitions.  First, I would take that to mean they’re not looking at any at the moment.  But second, it made me think what that means for the Microsoft-Yahoo relationship if its true.  If Microsoft is determined to follow a go-it-alone strategy, how will they grow their search and advertising businesses?  It’s a safe bet they’re not suddenly going to hobble Google.  No, Microsoft has their own version of the scorched earth strategy. 

My bet is that it could be much worse for Yahoo than the investment community’s theory they’re just waiting to acquire them later.  The danger scenario for Yahoo is that Microsoft has decided the best approach is to spend up to the 40-odd billion bid taking all the market share they want away from Yahoo.

Why not?  Clearly Yahoo is in a severely weakened state.  Culturally, this is exactly what Microsoft has always done well.  Focusing all their energy on crushing the life out of a competitor is familiar ground.  And who wouldn’t want to view Yahoo as that competitior rather than try it against Google?

Even worse is that Google might actually decide they need to pursue a similar course.  Rather than let Microsoft have the share, they may feel they need to take it.

Tough position for Yahoo to be in, caught between those two giants.

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No sooner did I post this did I read that Microsoft has now approached Facebook to see if they’re interested.  As I say above, Microsoft is done with Yahoo.  They are very black and white about who is an enemy and who is a friend.  Once you’re an enemy, they stop at nothing to crush you.  This is how it starts.