"The benefits from the deal take an awful lot longer than most people would have thought," said Larry Haverty, a portfolio manager at Gabelli Funds, which owns Yahoo shares. "It's not a game changer. It didn't match the anticipatory rhetoric from either company."
The two companies are planning to yoke their fates in an effort to steal some of Google's 65% share of the search advertising pie, a market worth nearly $12 billion in the U.S. alone, according to research firm eMarketer.
"I think that it's a strategic mistake for Yahoo," said Karsten Weide, an analyst at IDC. "If Microsoft should fail to keep up with Google in terms of search quality, then Yahoo's ship will sink along with Microsoft."
Google said in a statement that it was "interested to learn more about the deal."
"There has traditionally been a lot of competition online, and our experience is that competition brings about great things for users," the Mountain View, Calif., company said.
If Microsoft and Yahoo complete their deal, the two companies will have to spend considerable time figuring out how to unite two complicated operations, and consumers may not immediately see a huge difference in the way their search engines operate.
But the consolidation could create opportunities for innovative start-ups in the Internet search engine business, Sullivan said. "If there's only two major players, it's easy for the smaller ones to get visibility."
Times staff writer Alex Pham contributed to this report.