MSFT Proposes Search Collaboration with Yahoo: A Good Idea?

After Yahoo (YHOO) spurned its initial offer, Microsoft (MSFT) said it was no longer in the game to aquire Yahoo. However, corporate raider Carl Icahn entered the fray last week with a proposal that would force Yahoo into Microsoft's arms, netting Icahn a huge payday if Microsoft ponied up the $33+ it was clearly willing to pay before.

As if this deal was not already complicated enough, Microsoft is now proposing to Yahoo some form of collaboration on search, presumably a deal where Microsoft and Yahoo search teams would team up against Google (GOOG).

We'll have to wait for more to critique the plan but at first glance I'd suggest this is a weaker plan than a full acquisition as it will wind up connecting two challenged search divisions at a time when clear, bold, innovative leadership is needed. I can't imagine Jerry Yang working under Microsoft guidance and getting much done, and conversely I can't see him successfully directing Microsoft folks towards the search success that has been eluding Yahoo for so long.

Microsoft Press Release

Disclosure: I'm still long on YHOO.