The man who had the Zune logo and "Welcome to the social" slogan" tattooed on his arm and back is getting the ink removed. [Real Dan Lyons]

Former AOL CEO Jon Miller, reportedly Microsoft CEO Steve Ballmer's favorite to lead the company's new online division, withdrew his name from consideration yesterday because he'll soon be joining Yahoo's board. So if not Miller, who's going to take on the task of saving Microsoft by building its presence on the Web? The top names under consideration:

Microsoft CFO Chris Liddell told analysts that the "chances of us buying Yahoo on a full acquisition basis are so small that they are essentially negligible." He said that Yahoo isn't worth what is was in February and will be worth less with every passing day. "We took the view and we still take the view that Yahoo is essentially a declining asset. We made a credibly generous bid with a very high premium because we were looking for speed." Maybe Microsoft-Yahoo never worked out because "negging" — the practice of insulting a prospective lover to make them "fall from the clouds and be interested in talking to you," as UrbanDictionary explains it — doesn't work in corporate courtship, either.

• Dick Fuld's Lehman Bros is considering selling Neuberger Berman for as much as $8 billion. [Reuters]

Microsoft is inking a deal to run its search results and keyword-linked ads on Facebook, CNBC reports. Make no mistake: Facebook employees share every bit as much disdain for Microsoft's lame Web efforts as the rest of Silicon Valley, despite the company's $240 million investment. So this news is unwelcome, and painful. But inevitable. What caused it?Facebook's slapdash decisionmaking about ad placement on the site, a direct result of CEO Mark Zuckerberg's endless dithering on the subject in the process of redesigning, led to the Microsoft search deal. In the end, Facebook decided to kick Microsoft's tacky banners off its homepage and users' profile pages, in favor of its own targeted Social Ads. That was a violation of Facebook's advertising agreement with Microsoft, of course, requiring a renegotiation of the deal. Microsoft, of course, was ready with its quid pro quo: Search advertising, a market Facebook has yet to tap, but was likely to eager to try to explore itself. Instead, it's running Microsoft search results, and Microsoft search ads, both of which are considerably less attractive than Google's because they draw a smaller base of users and advertisers. A hard lesson for Zuckerberg: Every decision has consequences, and pursuing his whims has costs.

Did Microsoft CEO Steve Ballmer really need 1,300 words to say the company has to do better against Apple and Google, with or without Yahoo? No, but he just can't help himself. A version you could get through before Microsoft's next reorg, below.

Everyone wants a piece of beloved former AOL CEO Jon MIller, who was oh so unfairly fired, loyalists say, by Time Warner CEO Jeff Bewkes. First gossips suggested Miller as a fit to replace ineffectual Yahoo CEO Jerry Yang. Then, on Monday, Yang himself said Miller would fill one of Carl Icahn's new seats on the Yahoo board. Now, a source tells Kara Swisher that Miller is "one of the top outside candidates on the list" to head Microsoft's new Online Services division. Maybe everyone can stop moaning about the way Bewkes handled Miller's dismissal now?

• Ford announced an $8.7 billion loss for the second quarter—its worse ever—and an $8 billion write-down. [NYT]

Flashback to 1996. Steve Jobs and Steve Ballmer in PBS' Triumph of the Nerds. Ballmer promises that Microsoft's newfound focus — after cutting ties to IBM — will rocket the company ahead. Just you wait and see!

Shhh, don't tell Kara Swisher, but we kicked back and let Murdoch's most ruthless mommyblogger ferret out the full email from Microsoft's CEO about the pending shuffling of jobs across the company. We'll just link to it from our pedicure seats at the Valleywag spa. Ballmer name-checks Apple, Google, and Yahoo among the company's main targets.

Here are all the talking points you'll hear about Kevin Johnson's departure as the chief of Microsoft's sprawling Platform and Services Division — and what to say about them. The failed Yahoo bid killed his prospects of becoming Microsoft's CEO. Perhaps, but Steve Ballmer, who is more to blame for the Yahoo debacle, wasn't going anywhere, and Johnson may not have been prepared to wait. Johnson was charged with competing with Google in search and advertising, and he failed. And you would have done any better? Facebook took Microsoft for everything it's worth in striking its deal for Microsoft to invest and sell ads on the social network — and that's Johnson's fault. True enough, but Microsoft's $240 million investment is pocket change for the software giant. Enough with the cocktail-party chatter. Here's why I think Johnson really left.

"The departure of Kevin Johnson, president of Microsoft's Platforms and Services Division, will be combined with a reorganization of the business unit, which houses both the online services business and Windows software for personal computers," reports the Wall Street Journal. Johnson was a rarity in Microsoft's top ranks — a business guy who rose up through Microsoft's sales organization, not a technical whiz kid who served as a special assistant to Bill Gates. He was seen as a possible successor to CEO Steve Ballmer. Instead, he's joining Juniper Networks, a telecom equipment maker. (Photo by AP/Elaine Thompson)

AdWeek's Brian Morrissey reports that "Microsoft banners will run across the site, but will no longer appear on the homepage and user profiles." Instead, Facebook's largely automated direct-sales operation will sell placements for one large slot or two smaller slots on the right side of each page. These ads might be video ads as well as static text over image ads, Morrissey reports. A source tells us Facebook's ad units are also changing to a more standard size — a move that will make them easier to sell.

In theory, Microsoft's license agreement for Vista says you can get a refund from your PC's manufacturer if you buy a model with Vista preinstalled, but replace it with Windows XP, Linux or another operating system. In practice, Equlibriate blogger Kim Kido, a k a uncle_benji, spent two months calling and emailing HP before the company finally cut her a $200 check. She's posted a detailed recap of the story, including screenshots of customer service emails and a photo of the check. I'm willing to bet Kido cost the company another $200 in customer service time. (Photo by uncle_benji)

With the Icahn business settled, Jerry Yang can move on to more important questions: For example, is he going to the Beijing Olympics? A week ago, he hadn't quite made up his mind.The dithering was utterly characteristic for the perennially indecisive Yahoo cofounder. But you'd think he could commit to a no-brainer like attending the Games. Yang is a Taiwanese native, and no fan of the Communist regime — China's jailing of a blogger, aided by Yahoo China's handover of email records, led to a humiliating session where he was called to the carpet in front of Congress. But the Beijing Olympics is a seminal event in the rise of Asia, where Yahoo has significant investments — one of the few areas where it has an edge on Google.

Reversing a long trend, one research firm says Yahoo and Microsoft have posted gains in search market share — at the expense of industry leader Google. ComScore reports that 61.5 percent of all U.S. searches went through Google in June 2008, 0.3 percent less than in May 2008. Yahoo saw 20.9 percent of the searches in June, up from 20.6 percent in May. Microsoft went from 8.5 percent to 9.2 percent. Does this argue for a Microsoft-Yahoo merger? Not especially, since those small, hard-won gains would likely evaporate while the combined entity fumbles for years in post-deal internal politicking.

There will be no proxy fight at Yahoo's annual shareholder meeting this August 1. Today, Yahoo and corporate raider Carl Icahn agreed to end the fight by awarding Icahn three seats on an expanded, 11-member board. Icahn, who owns 5 percent of Yahoo, told the Wall Street Journal he still wants Yahoo to sell — either the whole company or just its search business at the right price — but that "I share the view that Yahoo's valuable collection of assets positions it well to continue expanding its online leadership and enhancing returns to stockholders."

Legg Mason portfolio manager saved Yahoo CEO Jerry Yang's job this morning, and far be it from the always-exclamatory Yang to hide his relief. Yang recorded a companywide video address, and reading a transcript filed with the SEC, we can't help but wonder if Yahoo's lawyers missed a few exclamation marks. "Hi guys," the transcript begins — but we're betting it sounded more like "Hi guys!!!!11!!!!"

Microsoft reported a first quarter net income of $4.3 billion. Revenues were $15.84 billion, up 18 percent over the same quarter last year. Not good enough for Wall Street, which pitched the stock price down 5 percent in off-hours trading after learning that Microsoft expects $14.7 billion to $14.9 billion in revenues during the third quarter, not matching the street's hopes for $15.04 billion. Microsoft blamed hiring and investments in online, though its business apps business was the real stinker last quarter, growing less than Wall Street expected it would [WSJ]

• Merrill Lynch's $4.65 billion second-quarter loss was almost twice what analysts had predicted; the firm also wrote down an additional $9.5 billion in connection with subprime losses. [Bloomberg]