Yahoo shares rose 2% last Tuesday as reports on expected higher Microsoft bid. Yet Search Engine Land reports maybe the US Justice Department will step against the takeover bid, helping Yahoo fight off the bid.

A interesting report by Seeking Aalpha discussing whether Yahoo!, Microsoft: Edging Closer to a Deal?. A report by Reuters says “Twenty-seven of 28 financial analysts responding to poll expect Microsoft will succeed in buying Yahoo”.

The current opinion is Microsoft’s bid will happen as expected. How Microsoft (MSFT) will handle their new toy, remains to be seen. Many developers are leaving Yahoo (YHOO), partly because of fear and suspicion of Microsoft’s way of doing business. Microsoft have shown no indication they understand the web, in particular the world of search dominated by Google (GOOG). Both Yahoo and Microsoft search engines have been losing market share to Google, combining the two companies with very different technology may result in Google capturing a larger slice of the search and advertising market. There is also the added risk to both Yahoo and Microsoft the merger will actually damage both companies.

Many home users now use web based applications like Google Docs, this trend will almost certainly spread to business users as the web based applications involve and become more sophisticated. Microsoft make very large profits from their many applications a move towards web based applications may create a significant threat to their hold on this market. Yahoo face the additional threat the merge will destroy the company.