Joseph Weisenthal at paidContent gathers analysts’ reactions, which point to the likelihood of the pending Google ad deal for Yahoo! and not much else. Jerry Yang, on Yahoo!’s official blog says that the company is focused on new initiatives and that while the breakdown was unfortunate that it doesn’t sway them from their competitive mission. Henry Blodgett thinks Yahoo! blew the deal and Ballmer simply became frustrated with the process.

Earlier today, Erika Morphy at E-Commerce News asked me for my thoughts:

“Microsoft’s business is still firmly rooted in its installed software base, but as we’ve seen with Vista, the long-term viability of this model for the company is in question,” Eric Litman, managing director of WashingtonVC, an early stage fund and incubator in Washington, told the E-Commerce Times.

[...]

“The strategic appeal of the Yahoo acquisition was to provide a global distribution and monetization platform for the company’s ongoing transformation to a [Sofware as a Service] model,” Litman commented.

While Yahoo! has been struggling to find its footing since Yang retook control of the company, Microsoft needed this deal more than they did. Vista sales are flagging, Google’s moving into the desktop software market, Mac OS and Linux are both gaining desktop operating system market share and enterprise customers are increasingly willing to evaluate Web-based software alternatives to traditional desktop applications. The question now is whether or not either Yahoo! or Microsoft can catalyze their teams or shareholders around this event and find a way to benefit it. Not surprisingly, it may turn out that GOOG, rather than either MSFT or YHOO, is the company to see the most significant upside from the uncertainty. 

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