Microsoft prepares for search battle

Do not rule out the possibility that Microsoft will snatch up Yahoo. The latest rumor is that Ballmer and Co. are willing to shell out US$20 billion to acquire it. I won't speak to the veracity of those reports, but Microsoft needs to get its search act in gear. Buying market share is absolutely necessary.

Steve Ballmer may have recently put the kibosh on the possibility of a transaction with Yahoo, but Microsoft's need for more market share stands. It needs to gain market share if it is even going to claw its way up to fight tackle Google.

Steve is also renowned for his single-minded determinism. It is likely that there will at the very least be a search deal between the two companies. Something is happening. My friend Mary Jo Foley is reporting that Microsoft is gearing up for a major re-branding of its search properties. Windows Live may become known as "Kumo," which is a Japanese word for spider.

Yahoo is a stronger brand than Kumo. That would provide Microsoft with higher ground to take on Google. Whether it is able to charge the hill or gets bogged down is another story altogether.

That said, integrating all of Yahoo into Microsoft does not make sense. It would be a painful process as cultures class, and talented engineers will leave both companies. Microsoft will have to pay to keep that talent on board - beyond what it would be paying for the company itself.