Microhoo is good for Google. Here's why...
1. Microsoft is spending a lot of money on this deal, without financing. It will be a struggle, and months will go by, before we even know if it will happen. It will then take even longer for Microsoft to shape the resulting technology into what it has in mind. Google meanwhile, has not only already implemented the next thing, but by then will have implemented the next, next thing. And be actively working on the next, next, next thing.
2. While Google gets started on the next, next, next thing, Microhoo will be an organization weakened by reorganization, and just starting at, what, web based email and search? Microsoft has already failed at those after showing up very late to the party as usual. This time they will not only be much later, but the party has already moved on.
3. Someone should tell Microsoft that email doesn't matter anymore. It's already been invented, back when they were ignoring TCP/IP and trying to get us to use Window for Workgroups.
4. Google could just stand by and watch its already weak competitors bog themselves down further. But Google also has any number of ways to slow the whole process down. Google moves further ahead with every month that passes, and with every dollar Microsoft throws at all its various failures.
5. Internet search is over too. Can Microhoo make a better search engine that Google? Maybe, in theory they can. But does anyone seriously think they can they do it starting one or two years from now, during which time the internet, and Google, will not be standing still? And even if they do, it will be so much better, dramaticly better, that 600 million people will switch? No - not unless they have a mind reading technology we don't know about. Microhoo has to move a mountain with a teaspoon to make this all work. Google has to... Well, do almost nothing.
6. The next big thing. By the time Microhoo is even worth mentioning, Google will have dominated mobile advertising revenue streams, and we'll be talking about what's happening next.
Microsoft should probably just work on video games. People seem to like those. Microsoft began its internet strategies, years ago, by pretending that the internet didn't exist. It's been down hill ever since. Pile Vista on and 2008 will surely go down as the year Microsoft finally jumped the shark.