At the end of January, Yahoo stock closed at $19.18 a share. Then came Microsoft's amorously generous $31 offer, later upped to something around $33, that still wasn't enough for Yahoo. Here we are seven months later, and Yahoo has dropped below its price before Microsoft made its proposal.Thanks to Yahoo's cold feet, Microsoft got lucky. If the deal really had gone through in that final round of negotiations, Microsoft would have overpaid for a company that already had adopted several poison-pill provisions to make the cost even more dear over the long run. Critical employee defections during and after that period have weakened and devalued Yahoo even further.

Microsoft's thinking on this deal still doesn't seem clear to me. Were they really trying to compete with Google, or merely trying to become the default (and distant) number two by swallowing Yahoo? In the end they didn't do much to hurt Google, and may even have helped Google if their search ad deal with Yahoo holds up to regulatory scrutiny. Yahoo, on the other hand, is hurting badly. Some of it is simply spiritual; the thought of an arranged marriage with Microsoft seems to have shocked Yahoo workers. But the resulting employee departures are real, and it's not clear whether Yahoo's leadership has a plan to deal with post-Microsoft depression.

The big losers in this non-deal are Yahoo shareholders. They've seen their payday disappear as it sinks in that Yahoo will have to succeed or fail on its own -- there are no other suitors. The question is, will Yahoo maintain its distant No. 2 position behind Google, or will a desperate Microsoft muscle its way past Yahoo? I wouldn't bet against Microsoft on this point, especially after the damage the Microsoft non-deal has caused Yahoo this year.