Ah, the morning after.

Microsoft and Yahoo have finally come to an understanding, putting to rest what seemed like an endless back-and-forth (As Barry Diller said yesterday,  “We’re not going to have to talk about whether or not it’s going to happen anymore).

In case you were at the beach, on the golf course, riding your bike, or hiding out in a cave yesterday, here are the very basics: It’s a 10-year Web search deal; doesn’t include display; Microsoft will the guarantee revenue per search for the first 18 months; Yahoo expects deal to boost income by $500 million and save about $200 million in capex; Microsoft will pay traffic acquisition at an initial rate of 88 percent; Yahoo will act as the global sales force for both companies’ premium search advertisers; etc. etc.

Just about everyone has weighed in on the deal, and more analysis is certain to come in the days ahead. In the meantime, here’s what we see as a few key questions about the deal.

Will it get regulatory approval? Tough call. It certainly will get a close look, given the high-profile names of the companies involved. And, remember, it leaves really only two major search engines rather than three. On the other hand, is the market really competitive at the moment? And won’t Google just keep extending its lead — and hurting competition — if Yahoo and Microsoft don’t get together? “Without this deal, I think it would be really unlikely that you’d have a market with three robust search providers in 10 years,” said Beau Buffier, an attorney with Shearman & Sterling LLP. (More here from Reuters)

What do advertisers and media buyers think? Most appear, at first blush, to be happy with the deal. Having one dominant search player — Google — makes it tough for the advertising community. So they seem to welcome the idea of some competition. Plus, it simplifies life for media agencies. “”This is extremely encouraging and introduces more balance into the search and display markets,” said Sir Martin Sorrell, chief executive of British advertising group WPP. “It is good for our clients and our agencies and for regulators.” (More here from Reuters)

Can Yahoo and Microsoft put their differences aside? This is always a major hurdle in joint-ventures, partnerships and mergers. It could be especially difficult in this case, given the fiercely competitive nature of both companies. What’s more, in the case nobody is fully in control, unlike a takeover, where, it may be ugly, but one company can impose its will on another. “It ties them together but in a complicated way with no long-term certainty and limited control,” said Ryan Jacob, chief investment officer of Jacob Asset Management, which owns Yahoo shares. (More here from Reuters)

Who came out on top? This will be the big one — at least in dinner party circles.  The early opinion seems to be Mcrosoft (particularly if you want to use stock market performance as a gauge). True, Yahoo is getting a big 88 percent of revenues from sending queries to Microsoft, it will cut spending, and increase operating income. But what about the company itself? Is banking on display advertising really a smart move? Are they locked into a strategic no-man’s land for the next 10 years? As BreakingViews put it, “This turns Yahoo into a company oddly reminiscent of the Internet also-ran AOL.” Reuters columnist Eric Auchard offered a similar comparison, writing “For Yahoo shareholders, it’s value destruction not seen since the misguided merger of America Online and Time Warner at the peak of the dot-com era.” (More here from Reuters)

Keep an eye on:

• Believe it or not, there is other news in the media world. For instance, Cablevision has approved the spinoff of its Madison Squarter Garden unit (Reuters).

• Sony had a tough quarter, reporting a big loss. Again. But the company says better times may be in sight.  (Reuters)

As the smoke begins to clear in Sunnyvale, California, following Yahoo’s much-anticipated reorg, the first outlines of the company’s new look under CEO Carl Bartz are emerging.

The new regime’s big winners (or survivors, given the slew of recent departures including finance chief Blake Jorgensen on Thursday) are Ari Balogh and Hilary Schneider, both of whom appear to be two key lieutenants under Bartz.

Schneider, a former executive at newspaper publisher Knight Ridder, now reports directly to Bartz and sees her sphere of influence broaden from the U.S. to all of North America. Under Yahoo’s new structure, North America is one of two regions in which Yahoo does business. The International region, which encompasses the rest of the world, does not yet have a leader.

Balogh, who was chief technology officer until Wednesday and joined Yahoo in January 2008, will now lead the newly-formed Products group, which combines products and technology under one roof.

“This organization is responsible for the vision, strategy, and quality of every product we create — regardless of region, device format or category,” Balogh said in an email to the troops about the changes.

Meanwhile, Ash Patel, one of the longest-serving Yahoo executives appears to have gotten a demotion. According to the new org chart, he sits one layer below Balogh, and will have a business card that reads “Product Architect & Evangelist,” which sounds somewhat less important than his former title of Executive VP, Audience Product Division.

Still unclear is the role of Joel Jones, who sits at the top of the org chart with the West Wing-like title “Chief of Staff.”

Two question marks remain over the CFO and the head of the International division — both positions that Yahoo is currently hiring for. For a company mounting a turnaround, Yahoo still has two vital slots to fill.

Two days ago, Microsoft CEO Steve Ballmer said Yahoo should team up with his company on search so they can take on Google. That’s not a new idea; after all, Ballmer’s been talking about a search deal of some sort at every public forum for months.

But then, Yahoo CFO Blake Jorgensen sent out a message loud and clear the following day, endorsing the idea of a search partnership. Yahoo is “not opposed” to doing a deal on search, he said, adding that such a deal could be in the form of a partnership or a sale of it search business. When Carol Bartz took over as Yahoo CEO last month, she said her first instinct was to hold on to search, but of course, “everything is on the table.”

So could something be brewing on that front?

Collins Stewart’s Internet analyst Sandeep Aggarwal thinks so. In a research note today, Aggarwal writes the “posturing” from both sides suggests that a search deal is in the offing:

Less than 36 hours after Microsoft’s CEO mentioned about increasing likelihood for a possible MSFT/YHOO search deal due to recent management changes at Yahoo (new CEO), yesterday Yahoo’s CFO essentially not only expressed Yahoo!’s interest in a search deal but also publicly set the stage for some possible negotiations with Microsoft. As we highlighted several times before, we continue to believe that a MSFT/YHOO search deal is very likely and appears to be a near-term event. We believe that a search deal with Microsoft can provide $8 to $10 per share lift to Yahoo.

Aggarwal even goes so far as to suggest that the next step for a possible search deal between Microsoft and Yahoo is the deal announcement itself. Do you think Ballmer and Bartz will be shaking hands soon?

Keep an eye on:

• Don’t write off Steve Jobs yet. Apple tells shareholders he will return. (New York Times)
• Gannett slashed its dividend 90 percent, but if you’re an investor in publishing companies, maybe you’re just happy it didn’t get scrapped entirely. (USAToday)
• Cablevision posts a loss on Newsday writedown. (Reuters)
• If Apple can make mobile phones, why can’t Nokia make laptops? (Reuters)

(Photo: Reuters)

Rumors of a Yahoo management reshuffling, two newspaper publisher bankruptcies and a bit of PR unsavvy on Microsoft’s part do not make for a quiet weekend. Although not exactly high-octane breaking news, the stuff kept happening in dribs and drabs throughout the weekend, leading me to update my Facebook status thus: “Anupreeta would have liked at least 30 percent more weekend.” But so it goes.

On Friday night, All Things Digital’s Kara Swisher reported that a major Yahoo management reorganization was underway, and could come as early as this week. The Wall Street Journal, which shares an owner — News Corp’s Dow Jones — with All Things D, followed with its own story a day later.

Then, Microsoft — a big employer of foreign workers which took some heat last month from politicians for announcing plans to lay off 5,000 people — dug its heels deeper into the mess. It seems the software giant overpaid some laid-off workers because of an accounting error, and now wants the money back. Yikes. Does Microsoft need to do more damage control than this?

Meanwhile, newspaper publishers continue to collapse like dominoes. On Saturday, Journal Register said it had sought bankruptcy protection, becoming the latest U.S. newspaper company to buckle under a load of debt and falling ad sales. Close on its heels, the Philadelphia Inquirer owner announced it too was filing for Chapter 11 — sending out the press release bang in the middle of Oscars.

Keep an eye on:

• Will Rupert Murdoch’s love of newspapers drag his entire empire down? Maybe, but that isn’t stopping the mogul from looking for alliances to save on costs. (The New York Times)
• Falling DVD sales could hurt the fortunes of media conglomerates. (Financial Times)
• Social networks are a telco’s best friend. (Reuters)

(Photo: Reuters)

This is turning out to be an earnings season when all bets are off on how technology giants will perform. With tech earnings taking the market on a roller-coaster ride, it wouldn’t be surprising if investors are a little sick in the stomach already. 

The hits and misses so far among the biggest and brightest:

Intel: Missed expectations, profit fell 90 percent and they said they wouldn’t give a detailed quarterly forecast due to the economic uncertainty.

IBM: Beat expectations and gave an outlook above Wall Street estimates. Not only did IBM shares surge on the news, it even lifted major U.S. indexes.

Apple: Record quarterly earnings made Wall Street delirious. Can’t blame investors for feeling relief after all the worry about CEO Steve Jobs.

Microsoft: Didn’t want to hold on to the bad news until the appointed time, so the it reported earlier than expected on Thursday. Said revenue and profit would almost certainly drop over the next quarter or two. 

Google: Saved the day, kind of, by balancing Microsoft’s disappointing results with news of a quarterly profit that topped Wall Street expectations.

Google gave Jefferies & Co analyst Youssef Squali some hope that the tech sector continues to be more resilient than other sectors. “Although it depends on the severity of the recession,” Squali wrote in an e-mail yesterday. “Nobody is immune forever.”

Squali carried this ominous tone into his Friday morning research note as well, calling this earnings season a “mixed bag” and the 2009 outlook “unanimously poor.”

With Yahoo and Amazon set to report earnings next week and no guarantee what surprises might be in store there, we wonder if investors will just call in sick until next year’s earnings.

(Photo: Reuters)

Able to use a computer? Check. High school diploma? Check. Work well with others? Check. Willing to strike a deal with Microsoft? Ummmm….

Indeed, in the hunt for the next top dog at Yahoo that last issue — whether the candidate can do a deal with Microsoft — may be the most pressing.

Since Yahoo’s announcement on Monday that Jerry Yang would step aside, the tech/media world has been abuzz with speculation about his replacement. Silicon Alley Insider is even running a terrific mock election — letting its readers vote among six candidates.

(News Corp’s Peter Chernin is one of them. Wouldn’t it be great if he got the job? It would let us spend some time chattering about what will happen over at Rupert Murdoch’s empire).

But as Anupreeta Das points out in the Reuters story, the only way Yahoo may be able to satisfy its investors is either a massive turnaround plan, which would be very difficult in this environment, or an M&A deal. And the best shot at a deal may be with Microsoft.

“Microsoft wants Yahoo’s search audience, the traffic, the clicks,” Needham & Co. analyst Mark May said. “They want to have as much as Google does. So it’s important for Microsoft to have a big presence in search and display.”

The upshot: Yahoo needs a CEO who is willing to negotiate. The trouble is that means it needs a CEO who would also be willing to possibly negotiate himself or herself right out of a job. Or go to work for Steve Ballmer. Hmmmm…

Keep an eye on:

• Dan Abrams, the former general manager of MSNBC, is launching a media-strategy firm, Abrams Research, to help business executives navigate public-relations challenges (WSJ.com)
• Procter & Gamble and Google are swapping some staffers — to help each other learn more about marketing (WSJ.com)
• Time Inc is expected to cut more than 250 from the payroll as part of an overall cost-cutting plan (NY Post)

(Photo: Reuters)