Wired:Every local paper carries the latest gossip and in this town, it's Microsoft versus Yahoo, a spectator sport that could easily drag most of the employers in Silicon Valley into the mudfight, writes  Danny O'Brien.

That said, if the grizzled veterans of the Valley's bust and boom haven't seen this scenario before, they've certainly seen similar - and worse.

The atmosphere here among Caltrain commuters and coffee- drinkers in the geek-fashionable coffee houses is one of fatalism. The lower rungs of the Valley have come to see corporate shenanigans like the idle hobbies of the decadent super-rich.

Empty of real business plans or a reason for their existence, upper executives perform strange and eldritch rituals to call down the stock-market gods.

Nobody thinks that Microsoft and Yahoo merging would be a good idea for anything but the short-term stock price (and probably not even that if the stock market has any clue).

Microsoft, based in Redmond in Washington state, is an alien civilisation with utterly different expectations and philosophies.

Even the way the two companies manage mergers is an object lesson in incompatibility. Yahoo's recent purchases have been described by some as "boutique buyouts". Hip companies like Flickr, Del.icio.us and Upcoming are bought out by Yahoo and then barely touched.

The few Yahoo touches that do settle on their website's front pages - Yahoo user logins, an extra logo or two - are usually resented by their established users and look desperately out of place.

Microsoft, by contrast, with almost no exceptions, eats its acquisitions whole. The products produced by companies bought by Microsoft rarely survive their encounter with Redmond. The exceptions: Hotmail, Xbox's in-house software company Bungie and Visio have to fight hard not to be sucked up into the rest of the company and dismantled.

Surely, though, Microsoft could not expect to swallow Yahoo whole without some changes in how Microsoft works? Well, without pushing the sci-fi metaphors too far, Yahoo's DNA is seen here as being almost poisonously different to Microsoft's.

For one thing, it's not a "Windows shop". Yahoo survived its early growth pangs in the 1990s thanks to a commitment to open-source software such as FreeBSD, PHP, Perl and Python. While it does not make much effort to be a highly visible contributor to the world of Unix and free software (unlike Google, which has an entire department dedicated to giving away the blueprints of its less confidential software), Yahoo is firmly embedded in it.

An attempt to introduce Windows and Microsoft systems would be met with open rebellion; a decision by Microsoft to refrain from this would be seen as an admission of failure by the Microsoftians.

Almost everyone agrees that the merger is as inevitable as a Greek tragedy. The recent declining of the initial offer by the Yahoo board was universally interpreted as: "We'd like slightly more money, please."

Microsoft has made it clear that it intends to fight to the bitter end. The gods have decreed it.

In an earlier time, many had called for the company to be broken up. Even Microsoft employees (under the banner of anonymous blogger Mini-Microsoft) called for a slimmer, meaner Microsoft.

If Yahoo agrees to split up to fight off its boarders, I think many here would agree that the separated parts (perhaps search, applications and advertising) might have a better chance of surviving - or at least of finding their own way.

The real obsession of the Valley now is interconnectedness. Yahoo and Google both offer services that they are happy to see their competitors use because it ties them closer to each other. In the end, all the inter-relationships hold everyone together in mutual support.

That's the hippy optimism side of Web 2.0, at least. Perhaps the Valley's greatest wish would be for Microsoft to stop treating its competitors as enemies to devour and start thinking of them all as genuine partners to co-operate with.

Try telling that to Steve Ballmer and his corporate raiders.