For a company at the centre of a historic shift in the global media business, Yahoo has looked surprisingly beleaguered in recent years. Now, with the failure of its search advertising partnership with Google, it has come to what Wall Street believes is a strategic dead-end for which there is only one solution: some sort of deal with Microsoft.

Yahoo's lack of growth demonstrates the scale of its troubles. By next year, the company will have been through four consecutive years with virtually no increase in its cashflow, estimated Mark Mahaney, internet analyst at Citigroup. That is in spite of having one of the biggest global online audiences at a time when advertisers are making a historic shift to the internet, and is a clear sign that it needs to find a new strategic direction, he added.