Microsoft (MSFT) and Yahoo (YHOO) finally agreed to become online search partners. Yahoo gets 10 years of revenue sharing with no upfront cash.

In waiting for more than a year for Yahoo to agree to a deal with Microsoft, the software giant got an impressive discount, compared with the $47.5 billion it offered in 2008 to buy Yahoo. Microsoft walks away with the larger share of the search universe, and parts with nothing.

Last year, that deal was the Holy Grail for Microsoft CEO Steve Ballmer, as DailyFinance's Alex Salkever notes. Ballmer was desperate to spend some of Microsoft's cash and get a prize. But what would have been one of the biggest tech takeovers turned into not such a big deal after all. By waiting, Yahoo's stock is about $20 a share lower than what Microsoft would have paid. The company also shed CEO Jerry Yang and gained CEO Carol Bartz in the process.

The adage of a bird in the hand was never more true than in this case. Yahoo's Yang, its board and its somewhat arrogant shareholders thought Microsoft would pay more if pressed. Did they really think the company was worth more? They saw a bidder across the table with dollars spilling from the bag of cash and assumed they'd make a killing. Instead, they mostly got killed.

"We face a formidable competitor in search," Bartz said on a conference call, the Wall Street Journal reported today. "What this deal is really about is scale." And there is the reality. When it comes to search, Microsoft and Yahoo are in Google (GOOG)'s shadow. This agreement gives them a larger shadow of their own to cast. If only Yang and Yahoo had kept that reality in mind a year ago.

Bartz, smartly, is moving forward. The new search partners plan to work together early next year, assuming regulators approve the agreement. Ironically, Yahoo shares fell 12 percent, becasue investors are disappointed that they didn't get more from Microsoft -- once again proving their lack of reality when it comes to the value of their own company.

Anthony Massucci is a senior writer for DailyFinance. You may follow him on Twitter at hianthony.

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