Microhoo. Yahsoft. No, keep at it...

Michael Arrington is pretty sure he understands why Microsoft is pursuing Yahoo:

Microsoft makes a ton of revenue on sales of software that sit on the computer. $15 billion a year for Windows alone, and another $16 billion for Office and Exchange Server in 2007. That’s 60% of Microsoft’s total revenue, and profits from those groups float the rest of the company. Microsoft isn’t a viable company without their consumer and business desktop software profits.

The real question isn’t “What can Microsoft do to fix their Windows product?” but rather “Even If Windows and Office were perfect, would it be enough to keep Microsoft relevant in the medium term?” I think the answer to that latter question might be “nope.” And that, of course, is why they want Yahoo so badly. Online advertising revenue is their only real hope of long term survival.

TechCrunch: Gartner Says Vista Will Collapse. And That's Why The Yahoo Deal Must Happen. (11 April 2008)