The public is the same -- no matter the time or the place -- they just don't understand Microsoft says, that a Yahoo deal is what it takes.  Microsoft's CEO Steve Ballmer says that the mixed reaction that the new Microsoft-Yahoo partnership received proved that the public (and the government) just doesn't understand.

Lamented Mr. Ballmer at Microsoft's annual Financial Analyst Meeting at Microsoft headquarters in Redmond, Wash., "Taking questions over the last 18 months, including yesterday, and walking through the deal and watching the market reaction, nobody gets it.  I know some people were sort of frothy in the market. I was surprised by the market reaction."

Given the fact that Microsoft isn't paying Yahoo anything up front and the specifics of revenue sharing haven't been fully revealed it seems inevitable that people would be a little confused.  Further a lot of the deal's biggest implications -- Bing replacing Yahoo's backend and Yahoo deploying Microsoft's ad platform -- will likely never be directly seen or realized by most of the general public.  As Mr. Ballmer puts it the deal is "a little bit complicated."

He describes, "Nothing got bought, nothing got sold, but the partnership in and of itself creates economic value.  It creates an immediate opportunity for synergy."

However, one key risk is that the government might not understand either -- it's currently reviewing the deal for antitrust violations.  However, Mr. Ballmer preferred to eschew that potential pitfall instead focusing on the positive aspects of the deal.  He says it will give both companies the market share they need to be a serious player in the market.  Further, he says that Bing's already impressive search should become much better, thanks to larger volumes of traffic, which will allow Microsoft to tweak its algorithm.

Mr. Ballmer was surprised that Yahoo's stock took a beating.  Despite the fact that it is estimated to lose 12 percent of its search revenue, it will more than make up for that in cuts to its research and development costs and capital spending.  And it is estimated that the deal will draw in $500M USD in new revenue for Yahoo.

Interestingly an internal slide was accidentally posted to the online deck accompanying Mr. Ballmer's presentation.  The inadvertently leaked slide showed that Microsoft is shouldering much of the costs that Yahoo formerly carried -- including an estimated expenditure of $170M USD for search research and development.  The slide also featured the potentially embarrassing revelation that Microsoft expects to lose money on the deal for at least the first two years.

However, given that the deal will last ten years, it has plenty of time to show its potential -- if it gets regulatory approval.  Microsoft just hopes the public -- and the government -- will, some day soon, finally understand.