• Silicon Alley Insider , Friday, June 13, 2008 11:30 AM

Almost alone in his praise of the Yahoo-Google deal, Silicon Alley Insider's Henry Blodget suggests that the Yahoo board essentially made the best out of a crappy hand. Blodget describes the deal as "smart," because it instantly adds a lot of cash flow in the first year, and even more in years 2-4, all without Yahoo having to spend a dime. The company also gets to keep its mightily expensive/mightily disappointing search platform Panama, and decide whether or not to phase it out over the next few years. Yahoo has probably already decided to do this, but it can't tell regulators that because then the deal won't be approved.

Microsoft, meanwhile, is "toast" in search. It was anyway, but now there really is no way the software giant can effectively compete in this sector-not in text search.

Unlike some critics, Blodget doesn't think regulators will have too tough a time passing this one, although Microsoft will certainly scare them into months of deliberation. He makes the very valid point, however, that Yahoo had already lost the search game to Google (as has Microsoft), and it can now focus on strengths like display advertising. This deal won't save Yahoo search; that business is destined to decline, Blodget says, but at least it can ride out its last years maximizing its revenue.

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