As a former Yahoo! employee, I read about Microsoft’s planned takeover of Yahoo! with interest. I really don’t think its a good idea for Yahoo!, especially with the far-different cultures between the two. At the core, MSFT is a software company, and for the last several years, much of YHOO has been a media company. It seems clear that MSFT doesn’t “get” online as well as they should, although arguably neither has Yahoo! recently (why on earth they went down the media path I don’t know – they seemed to have a good philosophy around UGC going.)
I still have a soft spot for Yahoo!, and I think much of their interaction design is much better than Google (I particularly loathe GMail’s design – amateurish visual design, confusing interaction design – granted, its powerful), and without the ATM of their ads, Google would be forced into a similar position as Yahoo! is now.