Microsoft gave up on buying Yahoo, at least for now. Microsoft's standard procedure of using large amounts of cash to solve a problem didn't work out.
It's worth remembering that Microsoft rode a stroke of luck (as noted in the History portion of the Wikipedia entry on DOS,the original IBM PC operating system) and IBM's name to the top, although they did have the sense to license their software to other PC manufacturers (again, helped by IBM's blunder in letting that happen). They have done well to stay there, admittedly, but they've done so largely because the IBM-compatible PC has remained (and likely will remain for some time) the dominant personal computer and a consistent cash machine.
Now the big thing is internet-based software, and Microsoft tried to buy a solution just like Bill Gates did when he had to run out and buy the operating system software to sell to IBM. But now no one is going to let them have it cheaply, and there's already someone ahead of them. Google doesn't seem like they're going to make the mistakes that helped Microsoft before. Maybe actually having to compete will bring something out of Microsoft that we haven't seen.