The fact that Microsoft is prepared to bid $45 billion-plus for Yahoo is a sign more of desperation than of good business sense.

It plainly is an admission that Google is actually right about something Microsoft has been talking about for more than a decade, but has failed to anything much about. A new report shows that it was Microsoft who, in the 1990s, warned that more and more (software) services and applications would move to the Net. In those days we used the term ‘net-centric’.

Yahoo never got much further than being a portal. It completely failed to use its early success in this field to move forward. I can’t recall one real Yahoo innovation. They are still what they were a decade ago, a portal – a big one, it is true, but still just a portal.

The company has been going from bad to worse, failing to show any innovation in a highly innovation-driven environment – a very sad story indeed.

Google, on the other hand, came up with something really revolutionary. It is THE Internet portal of choice for more than three-quarters of the one billion-plus Internet users around the world. And no one has been able to beat it.

Google has gone from strength to strength in its core business. It doesn’t have any real competition in the western markets. At the same time it has come up with truly revolutionary applications. Regardless of where I travel around the world I am amazed to see almost every news broadcast uses Google maps.

Another development that I have observed is that all our researchers have set up Google Mail accounts for some of their research activities. They could have chosen any of the other free services, but they went for Google.

Microsoft has become yet another incumbent and it has a huge and lucrative traditional software market to defend. In the same way that telcos are reluctant to cannibalise their lucrative voice incomes, so is Microsoft defending its old-world products.

It had the vision of becoming net-centric, but instead decided to hang onto its traditional business models.

The MS Vista product is a clear indication of incumbency. I have not come across one happy user, yet it is almost impossible to avoid Vista when buying a new laptop. This is patently monopolistic behaviour, which doesn’t fit at all well with a net-centric (open source) vision.

Will two bad things – an incumbent software company and a failing Internet portal – create a good new business? I don’t think so. Google is far superior and well ahead in Internet innovation, and I can’t see any synergies in an MS Yahoo that would challenge Google.

But there is another reason I don’t like the proposed merger, and I believe this is even more important than what I’ve suggested above.

We are taking a competitor out of the market. Certainly, in its current format Yahoo is not much of a competitor, but the company certainly has the potential to perform significantly better. From a competition point of view it would have been better if another (media) company acquired Yahoo and used its skills to compete with both MS and Yahoo, while at the same time creating some innovation through its uniqueness in the market.

But in the end will it matter all that much? I don’t think so. There is enough innovation in and around the global Internet to produce a gradual flattening of the market.

By this I mean that local Internet media companies are becoming more prominent and they will grab a larger share of the overall market. The Internet is an open platform where everybody can compete, and new Internet media companies are being born daily. This is by far the best long-term security for competition and innovation.

To be perfectly honest I consider the $45 billion to be a waste, as I don’t think it is going to add anything to Microsoft that it couldn’t achieve by itself with a fraction of that money, especially with the enormous global marketing power that the company wields.

Imagine what $45 billion could do if it were to be invested in some of the budding Internet innovations that are popping up. What Microsoft needs is a new Internet revolution, similar to those delivered by Google at regular intervals. This would achieve more than buying an ailing Internet portal.