• Wired, Tuesday, October 28, 2008 11 AM

Unless it is able to buy all of Yahoo--or at least its search business--by 2010, Microsoft will be forced to get out of the advertising business entirely, according to analysts at Cowen and Company.

"None of Microsoft's online initiatives have gained traction and we do not believe the company's current strategy will result in a change in the status quo," said the analysts. "We estimate that the OSB unit will have a 7-8% drag on Microsoft's earnings in FY2009. As the economy slows, we believe pressure will increase on the company to focus on profitable initiatives."

Microsoft claims it is no longer interested in buying Yahoo, but as the latter's deal with Google languishes in a Justice Department investigation, its options dwindle. If that deal fails, Yahoo's price could drop to the point that Microsoft could find itself once again interested.

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