Why Microsoft Needs Yahoo!

The escalating rivalry between Google(GOOG Quote) and Microsoft(MSFT Quote) may have an unexpected beneficiary: Yahoo!(YHOO Quote).

As Google continues to encroach on Microsoft's turf -- the search giant introduced an upgraded version of its application suite last week -- Yahoo!'s potential value as an acquisition candidate is growing for Microsoft.

And while speculation about a Microsoft acquisition of Yahoo! has been swirling since The Wall Street Journal reported last year that a faction within Microsoft's MSN search division was pushing for such a deal, recent developments make the case even more compelling.

For one thing, Google has continued to dominate the search space and pick up market share since May 2006 -- when reports of a possible Microsoft and Yahoo! deal first surfaced -- while Microsoft has ceded ground despite its best efforts. ...