Update: Keith Gaughan in the comments points out Yahoo is a FreeBSD shop primarily. I stand corrected. However I assume any "cloud" OS services would provide Linux as their primary platform. End.
The downside of MSFT dropping the bid is we don't get to see what their strategy would have been. Would they have attempted to migrate everyone over to the Windows platform? Really?
Would they have dropped the reported Yahoo move into providing cloud computing services? (I assume these would/will be based on Linux and open source generally. Who would do or could afford otherwise?)
How could MSFT purchase on open-source Linux based company without migrating to Windows or altogether dropping the open source Linux bits? I suppose they could move all the Linux bits to Novell / Suse. But that's still an endorsement of Linux generally, which in spite of the Novell arrangement MSFT still detests.
Do they just pull a 180 and hope to become a true Internet / Linux / OSS company over night? That would be *something*.
Sit back and think about it. Wow. Is Microsoft stuck in a bad place with the Internets or what?