Microsoft walks away from Yahoo!

Microsoft (NASDAQ: MSFT) made it clear, once and for all, that it does not need Yahoo! (NASDAQ: YHOO) to be successful with its internet advertising strategy. Microsoft's Yusuf Mehdi, the head of ad strategy at the world's largest software company said that [subscription] its current internet products plus customers and tech it will get from buying aQuantive (NASDAQ: AQNT) round out the arsenal that it needs to compete for online advertising.

The announcement leaves Yahoo! in a a difficult position. With Google's (NASDAQ: GOOG) purchase of DoubleClick, Yahoo! does not have a large presence in the internet ad serving business. Its share of the search market is still dropping according to Hitwise, and there is still little evidence that the company's Panama advertising search product is bringing in a large slug of new revenue. Yahoo!'s top line only grew about 10% in the last quarter.

Yahoo!'s shares jumped from $28 to over $33 when the press published reports that Microsoft was interested in buying the web portal. But, the stock has sold off to $28.60 since then. Investors are likely to do very little with the shares until Yahoo!'s next quarterly earnings report. If it is weak, and Panama has not produced a quarter of solid results, it will be a long year for Yahoo! shareholders.

Douglas A. McIntyre is a partner at 24/7 Wall St.