Bill Gates, the nerdy and controversial co-founder of virus-y software monolith Microsoft is handing over the reins of his monster corporation. His last official workday will be June 27th. "Three people will essentially fill the void left behind when Bill Gates retires from the company he and friend Paul Allen co-founded in 1975. Since Gate's began his transition from leading Microsoft to heading his personally-bankrolled charity, The Bill and Melinda Gates Foundation, his job as chief software architect has been handled by Ray Ozzie. Craig Mundie inherited Gate's chief research and strategy officer duties, while former Harvard classmate Steve Ballmer became chief executive officer at the Seattle-based software colossus." But will become of poor wittle Microsoft when daddy leaves?

While a young student at Seattle's snootiest private prep school, Lakeside, dweebish Microsoft co-founder Bill Gates was asked to write the computer program that arranged students' class schedules. Having just absorbed the student bodies from a private girl's school, Gates gamed the system to make sure all his classes had nothing but the hotties, even though males outnumbered females 3-1. He may not be the sexiest CEO out there, but points for trying.

Microsoft CEO Steve Ballmer told the Financial Times that people who think Microsoft would be better off giving up on search and acquiring a company such as Facebook instead. People who say otherwise "don’t understand what they’re talking about."

Facebook now allows advertisers to target users based on their workplace, major, and keywords — which can include a job title. Smart. What's odd is that Microsoft bought a full-page ad in the San Jose Mercury News in order to poach Yahoos, instead of creating a Facebook ad targeting software engineers with computer science degrees living in Sunnyvale and working at Yahoo, ages 30 to 45. What does $240 million for a 1.6 percent stake in Facebook get you these days, if not a basic tutorial on how to use the company's products?

No wonder Carl Icahn thinks that Yahoo's search advertising deal with Google has merit — turns out that his blog, The Icahn Report, uses Google to help readers search. Not that there's much content to search, as it just went live today, with an archive only going back a week to June 12. Which just happens to be the day that talks with Microsoft ended and the partnership with Google was announced. One keyword you won't be able to find with a Google-powered search of Icahn's blog? The word "Yahoo."

Microsoft bought a full page ad in the San Jose Mercury News reading:

"Microsoft has quite a boat over here in Cannes," says AdWeek's Brian Morrissey, reporting from the 2008 Cannes Lions advertising festival. He writes:

While Yahoo shares hover around $23, deep inside Yahoo shareholders' hearts there is a longing for the days when Microsoft actually put a $33 per share offer on the table. The hopeful among these shareholders say that day can come again. Since a complete takeover of the Yahoo board would initiate a change in control severance package which all but precludes a renewed bid from Microsoft, these shareholders now plan to replace only board members who fought to keep Yahoo independent — specifically purple bleeders chairman Roy Bostock, Gary Wilson and Ron Burkle. “If we can handpick the ones to vote out, it might be easier,” one investor told Kara Swisher. “There are a lot of voices on that board that don’t get heard enough and need to.” Another, likely whispering in fervid tones, swathed in tattered rags and blind as a seer told Swisher: “the only thing to do now is to try to convince Microsoft to either make a better search offer and maybe even another bid and get a board in place that will welcome that overture.” (Illustration by Trevor Blake)

Microsoft is already telling advocacy groups say the Google-Yahoo agreement will "limit choices for advertisers and publishers" and "destroy a competitive alternative." For its Google deployed its Chief Guy Who Invented the Internet, Vint Cerf, to tell reporters there's nothing to be afraid of. "In the case of Yahoo, the company believes that it will be beneficial to assist Yahoo with its experiment," Reuters reports Cerf cooing at a press event. "That's all this is: a nonexclusive arrangement to allow Yahoo to use at their discretion some of our advertising capability." Ask how Google will respond to Microsoft's claims that the search giant now controls 90 percent of all search, Cerf said, "We simply say we're trying to encourage competition in the environment and we'll take steps to assist where that seems to be possible." Sold? Remember, this guy invented the Internet. (Photo by Charles Haynes)

Microsoft has purchased Waltham, Massachusetts-based Navic Systems, which complies data from cable boxes in order for advertisers to target based on demographics and geography. Microsoft wants to build an Internet dashboard to allow marketers to purchase online display, search, videogame and TV advertising all in one place. Mostly, Microsoft wants to do this because Google, which hired NBC executive Michael Steib to sell the idea to broadcasters, wants to do this. Google cofounder Sergey Brin likes to say Google will bring the accountability of online advertising to television ad-buying, but we're not sure there are enough metrics or market demand for that to happen. TV advertisers and their agency-buyers seem to agree with us. Last we heard, only about 200 actually use Google's product.(Photo by videocrab)

The operating system from Redmond that was going to blow developers away, Windows Vista, is being used as an application platform by only eight percent of software developers surveyed by Evans Data. 13 percent are developing for Linux, and a whopping 49 percent are still developing for Windows XP, which was released sometime before the birth of Mark Zuckerberg. [News.com]

Why did Yahoo turn down Microsoft's offer and — to the disappointment of shareholders, employees and board members — go for Google's instead? Because Google will allow Yahoo to continue selling some search ads to its display advertising clients, while Microsoft would have insisted its sales team handle all Yahoo search buys. Allowing its display advertisers to purchase "integrated media" — search and display together — is very important to Yahoo. But is it important to Yahoo's customers? According to our sources on Madison Avenue, not really. Or, at the very least not yet.

New York Times columnist Joe Nocera's open letter to Yahoo CEO Jerry Yang over the weekend nicely captured Yahoo shareholders' rage over the whole Microsoft mess. But will they stop fuming long enough to read all 1,500 words? A version they'll be able to finish before their lawyers get done filing the next shareholder lawsuit, and Yang will be able to finish before the next top executive's resignation letter hits his inbox, below.

If you ask an investment banker, the only way Microsoft is going to compete against Google is to acquire a dying 1990s Internet brand. Gabelli & Co. analyst Christopher Marangi now wants the company to acquire AOL from Time Warner. He writes:

Despite all the reports to the contrary, Microsoft actually ended its bid to acquire Yahoo way back in April. At least, that's what Microsoft topper Kevin Johnson would have his underlings believe. "In a March 10th meeting in Palo Alto, we explained to Yahoo management the importance of reaching an agreement by the end of April," Johnson wrote in a memo.

Corporate raider Carl Icahn wanted Yahoo to sell to Microsoft, but after keeping quiet while Yahoo stock tanked last week, he's now making noises that he's okay with the Google deal. He told Reuters:

The Google Street View car was Spotted in Microsoft Country last week after launching in many smaller markets around the country first. Apparently the drivers, rather than use some fancy, newfangled Internet doohickey, simply burn the data captured by the rooftop camera array onto a CD and mail it back to Mountain View. The fact that Portland, Oregon and Juneau, Alaska were added to the list of Street View cities before Seattle inspired an April Fools article in local publication Naked Loon quoting a fictional Google spokesmonkey as saying the addition of Seattle was "extremely unlikely, save for some kind of highly localized disaster centered somewhere in Redmond."

What's deal-making like at Microsoft, post Yahoo-Google? Kind of sad. For example, instead of planting stories with billion dollar ramifications, Microsoft PR over the weekend fed the Wall Street Journal a story on how MSN videos in online sports and entertainment are so popular they exceed sold inventory, so Microsoft will ask the YuMe network to sell extra ads. For Microsoft PR, victory is no longer a leak that breaks the ice, but sneaking PR speak like the following into a Journal reporter's copy:

The National Black Chamber of Commerce has weighed in against the partnership between Google and Yahoo, suggesting that by gaining control of Yahoo's search advertising inventory, it will create a single auction market for search ad placement and lead to higher prices.

Microsoft offered $1 billion to take Yahoo's search business off its hands, along with a buyback and other details. Henry Blodget has a detailed financial analysis of why Yahoo walked. But why spend all that effort? Rumor had had Microsoft offering $21 billion for Yahoo's search business a few weeks ago; it had already offered to pay $44.6 billion for the whole company. The $1 billion figure was a nice, round deliberate insult — a way for Microsoft executives, so desperate to get their hands on Yahoo's search business a few months ago, to say that they thought it was virtually worthless now. Microsoft's offensive intent was transparent; Yahoo walked, and took Google's less-complicated, less troubling deal instead. Is further analysis needed?