Steve Ballmer’s luncheon meeting with Yahoo’s chairman Roy Bostock is being seen as a straw in the wind of a possible deal between the companies they serve. The possibility of such a deal has been ostensibly revived with last week’s meeting and the appointment of a new CEO over at Yahoo. But it might not be a great thing for Microsoft, after all.

Microsoft should concentrate on its core business of software, rather then treading Google’s domain – online search advertising, according to Slate’s Farhad Manjoo. In fact, he goes as far as saying that Microsoft should not even be in online advertising being a software company.

He points out that Microsoft’s core business has been ignored for a while and cites Vista and Windows Mobile as emblems of that ignorance. Manjoo finally has some M&A advice for Microsoft: buy Palm for just $1 billion or $2 billion instead of Yahoo - and its plethora of problems - for tens of billions.

Palm’s upcoming Pre is being tipped as the iPhone killer -  that everyone is so desperately dying to encounter. Its interface does not appear to be a mere reinvention of the iPhone wheel, and may just be at the vanguard of mobile phone technology. On the other hand, Windows Mobile is a touch quaint compared to other mobile operating systems. So you can see why Microsoft’s unofficial M&A advisor believes that Palm may prove to be a better buy than Yahoo.