Yahoo by making itself technologically dependent on Microsoft for 10 years has given up on search. This effectively puts Yahoo out of business. It's a golden parachute for Yahoo's executives but jeopardizes any chances that Yahoo will ever be able to play in the search business again.
As for Microsoft, it allows microsoft to gain instantly a few percentage points in web search, which should allow them to extract higher ad fees.
Microsoft is patient and they hope that they are buying 10 years with which to figure out how to bring down Google. They have enough money, but when it comes to the web, I think Microsoft is largely irrelevant.
If it wasn't for their desktop monopoly, nobody would even care about anything LIVE. They shove that stuff down users throat every time a user tries to download messenger, which they are only interested in because of the network effects that allowed Messenger to become relevant in the first place. I remember when no one even knew what messenger was and people hated it initially, but it kept popping up after every single XP install and telling people that they needed an account and enough people fell for this crap.
Only another Google-like startup could outgoogle google, but it certainly won't be Microsoft or Microsoft and Yahoo's dead skeleton.