I have spent most of my time thinking about Microsoft's offer for Yahoo! from Yahoo!'s side but the other side of the coin is interesting as well.  Does this proposal make any sense for Microsoft?

I do not believe that this deal will sail through antitrust review either in the US or Europe especially with Microsoft's history towards antitrust behavior.  In addition, I think that Microsoft may run into an issue with their Hotmail and Yahoo! email products.  They may need to spin one of them off to obtain the requisite approval.

Also, I am highly skeptical that Mirosoft can integrate Yahoo! in a timely and efficient manner.  Most large acquisitions in the internet space do not work out.  A quick look at some of the larger acquisition failures includes:

• Yahoo! acquisition of Broadcast.com
• Google's acquisition of Youtube
• Microsoft acquisition of Hotmail
• eBay's acquisition of Skype
• CNET's acquisition of MySimon
• Excite@Home of BlueMountain.com
• Terra Networks acquisition of Lycos
• AOL's acquisition of Netscape
• Yahoo! acquisition of GeoCities
• @Home acquisition of Excite
• AOL acquisition of TimeWarner

There have been a few acquisitions in the internet space that have worked like Yahoo! acquisition of Overture, eBay's acquisition of PayPal and News Corp's acquisition of MySpace. 

That being said, if Microsoft does acquire Yahoo!, the merger of the two cultures will be a monumental task that will sap vital business focus during a time when Google will be continually improving its own products and services.  After two years of integration, Microsoft will finally be in the position to go after Google but by then Google will then own 90% of the market.  Too little too late.

As a result, Microsoft is in effect buying an asset that will be depreciating in its hands so regardless of whether the price is too high now, they will be overpaying since its value will continue to decline.