Yahoo To Reject Microsoft bid - Infrastructure Angle Part III

It looks like Yahoo is set to reject the Microsoft bid.  This article on MSNBC is a pretty good overview.  Personally I think this is a huge mistake.   Yahoo cannot make the infrastructure investments required to beat Google.  Microsoft can.   Microsoft just doesnt have the web/online DNA that Yahoo has.   Over the past week or so I have thought long and hard on this.   Google is the 800 pound gorilla in this space, and together the Micro-hoo conglomerate would still only make a 300 pound gorilla.  But its another choice.   Whether you love Google or hate Google, they need competition.   They effectively have none today.   All this talk about creating monopoly seems centered around the IM market.    With recent moves by AOL/Time Warner, its pretty clear that Google could easily pick up AIM and rectify the solution. 

In my mind - Google picking up AIM would give them a 30% share of the IM market, and near 70% of the Search market.   Microsoft-Yahoo would have 30% share of the Search market, and a 70% share of the IM market.   Microsoft Messenger and Yahoo Messenger already interoperate anyways.  Its not like we are going to get additional functionality from the IM side that we dont already have.   Google Talk has been a complete failure in my mind.  The product is terrible in my opinion.  They could learn alot from picking up a mature product like AIM and actually have credibility in this space.   

As I read the various articles it looks like Microsoft could raise the offer or take it directly to the shareholders.   My opinion is that Microsoft should pursue. Whether they know it or not, both companies need each other.