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Microsoft-Yahoo coming back to life?

As Yahoo’s stock dives, speculation is rising that Microsoft could make another acquisition bid.

In May, at the height of negotiations, Microsoft offered Yahoo $33 per share — a significant premium, but still a price that Yahoo execs said undervalued the company. Now, with Yahoo stock hovering around the $13 mark, the Associated Press says Yahoo would be under even more pressure to accept a new Microsoft bid.

Most of the talk around a Microsoft-Yahoo deal focuses on Yahoo’s finances. But there’s an equally important part: what the acquisition would mean for Microsoft’s search and advertising business. That’s an area that, according to at least one Microsoft partner, needs some serious improvement.

John Powers, CEO of Digipede Technologies in Oakland, Calif., announced today that his company is done using Microsoft’s online advertising system, AdCenter.

Microsoft AdCenter is entirely without value to our company, inferior in every measurable way to competing offerings from Google and even Yahoo, and a time-and-money sink of unusual scope, even for Microsoft,” he wrote on his blog, Powers Unfiltered.

Microsoft has poured a lot of money into AdCenter improvements over the past few years, but Powers said none of them have helped drive qualified leads to his business. He also said AdCenter’s interface is clumsy, and the billing system is “apparently defective.”

In discussing the potential of a Microsoft-Yahoo deal, the AP raises the most important question of all: Is Microsoft still interested?

We don’t know yet. But from the sound of things, they should be.

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Colin -- I actually have an entirely different take on this issue than those who have speculated on the possibility of Microsoft purchasing Yahoo at a greatly reduced price. I think Microsoft should MOVE ON from its third-and-worse place offerings, and FOCUS on its core strengths. GIVE UP on online advertizing -- it's OK. GIVE UP on the Zune -- it'll be fine. GIVE UP on most or all the miscellaneous initiatives that have more to do with chasing some other market leader, and FOCUS on the great products Microsoft has in its core business that still have huge upside potential. Less Google-envy, less Apple-envy -- and more resources for Servers and Tools and the enterprise sales teams (and of course, for Partners)!