“This is a stupid deal, and I'm not happy,” said Jane Snorek, who helps manage more than $70 billion in assets at First American Funds in Minneapolis. She said the firm began selling much of its Microsoft position on Saturday, when the stock dropped 6.6 percent, the most since April 2006. “I’m expecting slow market-share erosion from Microsoft and Yahoo.”

Microsoft Chief Executive Officer Steve Ballmer is attempting the biggest technology takeover after his own efforts failed to narrow the gap with Google. Acquiring Yahoo would still leave Microsoft with a smaller share of the Web search market, and Ballmer would face the distraction of combining the businesses, said Colin Gillis, an analyst at Canaccord Adams in New York.  “Sergey and Larry are going to have no problems sleeping,” Gillis said, referring to Google founders. “I don't see them tossing in their beds tonight.” Gillis recommends buying Google shares, has a hold rating on Yahoo, and doesn't cover Microsoft. He said he doesn’t own shares in the companies.

Struggled mightily
“Yahoo has struggled mightily to compete against Google,”said Dave Stepherson, a fund manager at Hardesty Capital Management in Baltimore, which holds about 2,81,000 Microsoft shares in its $650 million under management. “That is not going to change just because they're pairing up with Microsoft”  The price is “incredibly expensive,” and Microsoft may have done better by making smaller purchases to build out its own business, he said.  Ballmer said in July 2006 that buying Yahoo wouldn’t help Microsoft, because only Google has a better quality product than Microsoft. “There’s no acquisition path,” Ballmer said when asked whether Microsoft should make a large purchase.