When Sun Chairman and then - chief operating officer Scott McNealy first discover about the HP / Compaq merger in 2001 , he likened it to ‘ two food waste trucks colliding with each other . ’ Some analysts see the bruit Microsoft - Yahoo treatment in the same light : an act of desperation by two lumber incumbents that are falling further behind Google each mean solar day .

If you remember , Yahoo ’s stock go on a rolling wave coaster drive late last week , after report of merger negotiation with Microsoft turn up , first in the New York Post . Stock pickers entreat up Yahoo ’s shares around 10 percent . Subsequent reporting , from the Wall Street Journal and others , cast doubt on the hearsay , note that the companies had been in talk for months and that insider felt a deal was unbelievable in the near future . Nevertheless , the alive trading suggested that Wall Street believes what Silicon Valley insiders have been suppose for a while : that when you peel back the Allium cepa on this deal , it may actually make a lot of sense .

permit ’s face at some of the pros and cons .

For starters , there ’s the obvious : neither Yahoo nor Microsoft has been able to get much traction in the fast - growing web advertizement business concern and are distant turn two and act three competition to Google . Would joining force result in more web seeker straying from Google ? Would Yahoo ’s establish advertiser base of operations be a ripe compliment to Microsoft ’s engineering science platforms and expertness , or would the integration of the two simply create more postponement and lost momentum ?

Verdict : Toss up

Then there ’s the issue of enterprise applications and services . Here ’s where the concept really starts to make sense . Google ’s been sticking its toe into the go-ahead amniotic fluid with efforts like “ Apps for Your arena , ” Gmail , and Google Docs and Spreadsheets — but clearly there ’s voltage for them to go much profoundly and hit Microsoft harder . Microsoft require to bulk up its web capableness quicker , to plan and give birth scalable internet services agency beyond its former “ Office Live ” efforts . With Yahoo , they ’d be purchase a leapfrog into the big(ger ) league of Web delivered services .

Verdict : Do the stack

Next , there ’s the culture issue . Google ’s been the rare bird that is able-bodied to combine a polish of excogitation with execution and scalable monetization . Microsoft excels at execution and monetization ( as we all make love ) , but it ’s innovation DNA seems still stuck in the productive client era . Yahoo “ start ” the Web , but is infamous for a scattered approach to excogitation and acquisitions , for its lack of focussed execution on fundamental businesses ( return ‘ The Peanut Butter Memo ’ ) and its unfitness to monetize traffic as well as Google .

meld the company would allow Microsoft to bring some disciplined execution to Yahoo ’s immature , Web - savvier manpower , lead in faster organic growth for both companies .

Still , there are crowing questions hanging over this deal . Will consumer and go-ahead Web businesses at long last be synergetic , or will they end up being completely ( or mostly ) separate ? Microsoft has “ consecrate ” to the consumer world through MSN and Xbox ( not to mention Office and XP ) , but its still unreadable if consumer mathematical product are really Microsoft ’s best prospects , given its monumental enterprise market contribution and standout production like SQL Server 5 and Sharepoint .

If the consumer / endeavor intersection trend accelerates , a Microsoft / Yahoo peck decently now would be brilliant in hindsight . But if bear a strong consumer WWW capableness ultimately adds little value to endeavor customer , and vice versa , Microsoft might be better off making its jump into the Web big - conference through a Salesforce.com acquirement , for example . And Yahoo might do well with a large media or communications parent , like a Verizon , Comcast or ( gulp ) Time Warner .

The next question centers on customers : would they view a Microsoft / Yahoo deal as a distraction for both companies , or as an throttle for most rich competition not just to Google , but to Oracle , IBM and SAP ?

And finally , there ’s the people question . When Terry Semel took the rein at Yahoo in 2001 , most of the top talent were 20 - something Web entrepreneurs . Semel added a mess of traditional amusement and medium folk from piazza like Readers Digest , CNET , print publication and the with child Hollywood studios . None of these folks ever had a lot of love for Microsoft , by the mode .

Now confound into that intermixture Microsoft ’s 40 - something tekki / product manager army , and who ’ll come out on top and after what form of carnage ? It ’s anybody ’s guess .

One concluding thought . With the exception of small tactical acquisitions along the room ( Great Plains , Groove Networks , Hotmail , etc ) , Microsoft has grown organically into what it is today : the largest engineering company on worldly concern by marketplace note value and the most profitable by a mile .

Yahoo , by contrast , would be nowhere if not for it ’s braggy acquisition ( Four11 , eGroups , Geocities , HotJobs , Overture , etc ) . Maybe a Microsoft buyout is just the last , logical stop on a prospicient M&A tour for Yahoo co - founding father David Filo and Yang .

So let the negotiations commence … and countenance hope the resultant role is something deserving Yahoo!ing about , for both enterprise customers and consumers .