Excellent analysis by Jason Calacanis about the Microsoft-Yahoo deal.

Today, with their Microsoft deal, Yahoo again undervalues their search asset. Again, they will be “Powered by…” and again they will destroy their brand and its value.

All that being said, Microsoft’s obsession with taking Yahoo’s second  place position and adding it to their 3rd place position is not an indication that it’s time to sell. Far from it. When Microsoft is  interested in a space it is a clear sign that you should be investing in it–not selling it.

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Nintendo didn’t give up when Microsoft came into the video game space–they innovated. Now the Wii outsells the mighty XBOX 50 million to 30 million. That is how you fight Microsoft: you innovate. Steve Jobs knows this, Nintendo knows this, and Oracle knows this. Yahoo, apparently, did not get the 40-year-old memo.

Aggression and innovation wins. Period.

To say it clearly: Microsoft does not enter a market unless it’s important, huge and on the way to becoming even bigger. Microsoft is the buy sign, not the sell sign. The people at Microsoft are brilliant and not to be underestimated–history has shown this to be true.