Microsoft Moves on Yahoo

Two recent stories leave no doubt that Microsoft is gearing up to be the only company standing in the way of Google's absolute domination of the search market. Last Thursday, Microsoft tapped former Yahoo executive Qi Lu to run its Internet division; according to the New York Times, Microsoft has assigned Lu, who worked at Yahoo for 10 years and oversaw the engineering end of its search and advertising divisions, the task of going head to head with Google. Then, on Saturday, Microsoft head Steve Ballmer again floated the idea of buying Yahoo's search division in an interview with the Wall Street Journal, saying that any such deal will have to happen "sooner rather than later."

This couldn't happen at a more critical time for Yahoo. Lu is just the latest in a long line of talent to flee the company since outgoing CEO Jerry Yang blew his chance to sell out to Microsoft earlier this summer. In fact, the Newsfactor Network has a fascinating little tidbit on one of Yahoo's biggest backers, the high-flying rogue investor Carl Icahn. Icahn, who pushed Yang hard to do the Microsoft deal and forced his way onto the board when it fell apart, has invested some $1.8 billion in Yahoo stock. According to Newsfactor, Icahn shelled out an average of more than $23 per share when he first got involved. Now that the company's stock has dropped to around $11 a share, Icahn has lost some $900 million for his troubles.

Former AOL head Jonathan Miller is currently trying to raise $31 billion to buy Yahoo's search division, and rumors have been flying that Microsoft will underwrite the deal and seize the search service using Miller as a proxy. Even if that happens, however, Miller's offer presently stands at $22 a share. That's twice what Yahoo trades at, and it still won't get Icahn his money back.