As most people probably know by now, Microsoft has abandoned its pursuit of Yahoo! The deal is dead, and Microsoft won’t pursue any hostile takeover options. In his letter to Yahoo! CEO Jerry Yang, Microsoft CEO Steve Ballmer cited several factors, notably money, Yahoo’s! poison-pill defense and the recent Yahoo!-Google ad outsourcing deal. What’s been interesting to me as in analyst has been watching the cognitive dissonance between the equity analyst/research crowd and the techies. Most everyone I know with a historical memory of Silicon Valley, and with a knowledge of how Yahoo! works, tells me that a Microsoft acquisition could have only ended badly. In short, the transplanted organ would have rejected its host.  As a friend of mine who works at Yahoo! put it, “You have to understand, the old-timers here hate Microsoft with a passion. About 20% of the staff would have left voluntarily, more-or-less immediately, and another 20% would have been laid off. And probably another 20% would have gotten disillusioned and left  over the next year or two.” If you’ll pardon the slightly messy metaphor, it would have been like transplanting an appendix which promptly bursts after the operation, poisoning its host and causing it to stagger around for a while. Perhaps knowing that the operation might have had toxic after-affects helped Microsoft come to its senses. I say “helped” in the sense that the primary cause of death for this deal was money, not culture. But still, the cultural mismatch of this deal was a contributing factor, and an under-appreciated one at that.