Microsoft - backed in to a corner?

This morning Microsoft announced their bid to buy Yahoo for $44.6B. Yahoo has appeared rudderless in the past year, lacking in a clear strategy, profits deteriorating and the share price sagging. On the flip side, Microsoft has been making deals to promote its advertising network and the myriad Live branded sites are still fighting for real traction. This is really two disparate cultures coming together to battle against a bigger rival, Google. If Microsoft did not buy Yahoo there is a possibility that Yahoo might have eventually done a deal with Google to leverage Google's ad network. That would have been the worst possible news for Microsoft. In that light it seems that this deal is essential in order to keep Microsoft in the Advertising game. Expect to see Yahoo and Microsoft's Ad networks merge. This has been rumored for so long it had to finally happen. Fred Wilson makes some interesting observations on his VC blog. Will someone like News Corp come in with a strategic bid? With Yahoo shares trading so cheaply this is Microsoft's only real opportunity to boost their position in search by leveraging the strength of Yahoo. Search is critical because that drives ad revenue. As we are seeing Social Networks are not taking off as sources of Ad revenue, at least from Google's perspective. So that leaves Search as the best monetization bet in town. The deal also helps Microsoft in boosting Vista and Windows Server. Think about - expect to see Yahoo sites running on Windows platforms. That will help Microsoft in the ongoing battle to eat in to Apache's market share. All in all Yahoo's weakness has effectively backed Microsoft in to a corner where they have no choice but to buy Yahoo before some other player comes in and snaps them up or Yahoo starts making strategic deals that would be detrimental to Microsoft. Update: I just read Stowe Boyd's assessment and have to agree. Two tired swimmers colliding. It about sums the situation up.