And now…if Microsoft can’t beat them, can they buy them? Mega-merger on the horizon?

A few days ago, I asked If Yahoo can’t beat them, can they buy them? I forgot about the 800 lb gorilla. Now Microsoft is sounding desperate to acquire Yahoo. I’m trying to figure out how this might be a good thing.

Internet Outsider is praying to the internet gods that this does not work out. If it does work, he says they better spin off MSN/Yahoo asap.

With all due respect to the amazing talent and resources at Microsoft, no company can do everything. Microsoft is now so massive and broad that it is competing with IBM and Oracle on one end, and Sony, Apple, Google, and Yahoo on the other. All of these businesses are complex and tough, and focus is a major advantage.

In the past 12 years, despite its enormous talent, power, and desktop/browser monopoly, Microsoft has done no better than become an Internet also-ran. Why? In part because of internal politics: In Redmond, the Internet business will always be second-fiddle to the Windows/Office cash machine. In part because of talent: Why would the best Internet talent want to work in a small division of a massive company, kowtow to Windows/Office kingpins, and get paid in stagnant Microsoft options, when he or she could become a billionaire at the next Google? In part because few, if any, dominant industry leaders in one technology wave have also dominated the next one.

Charlene Li on why the deal makes sense and why it won’t work

John Battelle doesn’t think it makes sense.

Om Malik calls it a “bad idea.”

Eric Berlin says the internet overlords are playing chess.

Waching CNBC right now and they certainly think it makes sense. General consensus is that Microsoft can sell advertising and Yahoo can bring traffic.