The New York Times hits the nail right on the head: If Microsoft were at the top of its game (as its numbers suggest), it wouldn't need to acquire Yahoo!:...[Iif its proposed acquisition of Yahoo signals anything, it serves as a confirmation that Microsoft's glory days are in the past. Having failed to challenge Google where it matters most -- in online advertising -- it has been reduced to bulking up by buying Google's nearest but still distant competitor. In many ways, the company has become exactly what Bill Gates used to fear the most -- sluggish, bureaucratic, slow to respond to new forms of competition -- just as I.B.M. was when Microsoft convinced that era's tech behemoth to use Microsoft's operating system in its new personal computer.
of course, just as with IBM, becoming "sluggish, bureaucratic, [and] slow" is not to say that Microsoft is going out of business any time soon. Rather, it's just to say that Microsoft's glory days of market innovations are well past it (not that anyone was doubting this - when is the last time it really did anything innovative?).