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The dirt on Microsoft's bid for Yahoo!

Microsoft and Yahoo! could never get past their preconceived notions of their own importance to get a deal done. Now both companies have to live with the consequences.

The Wall Street Journal has published a detailed account of Microsoft's talks with Yahoo!, and the reasons for the fall-out. One of the juicier bits is that Ballmer blamed the bankers involved for "screw[ing] everything up."

Perhaps. But reading through the wreckage, it seems much more likely that the gamesmanship on both sides ultimately resulted in both companies losing. Microsoft still lacks a compelling voice on the web, and Yahoo!...well, Yahoo! increasingly does, too.

"They believed that we needed them much more than they needed us," one person close to Microsoft says. "Ultimately, we called their bluff."

Bravo. Now you can both fail together.

Again, I have been hoping the deal would go through because I think it would help Microsoft to make some critical decisions that would favor a more open, pragmatic Microsoft. Microsoft-plus-Yahoo! wouldn't be able to force a .Net future down the web's throat, and would enable Microsoft to innovate beyond its closed platform.

Microsoft needs Yahoo!, not so that it can compete in search, but so that it can compete on the web.

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