With Yahoo shares down better than 15% in the two trading days since it climbed into bed with Microsoft, Microsoft CEO Steve Ballmer, the cat who ate the canary and maybe forgot there for a moment that he didn’t buy the company, told Microsoft’s annual analyst meeting Thursday that “It’s sort of, like, unbelievable….Nobody gets it.”

Instead of carping about Yahoo not getting a boatload of money upfront, he said they should focus on the $500 million boost to operating income it’ll see.

“This is a company that makes $700 million. You’re talking about a 70% expansion just for doing the deal.”

“Did they sell their search business? No.” But it’ll get 88% of the revenue with zero costs.

One of the popular opinion pieces being passed around contends that “Yahoo committed seppuku…The once-proud warrior of the Internet space laid down its sword, knelt at the feet of Microsoft, and gutted itself…There was no honor in this death: It was brought about by the shame of losing to Google and a lack of faith in its ability to compete in the space it created. To be clear, Yahoo didn’t need to do this deal; Microsoft did. Ultimately Yahoo will look back at this moment as the second – and perhaps fatal – mistake in its epic history.”

See http://calacanis.com/2009/07/29/yahoo-committed-seppuku-today/. A fun read but maybe not real-time what-do-we-do-now thinking.

Meanwhile, Ballmer regrets charging less for Windows in developing countries on the theory it would increase sales. “The theory was wrong,” he said. Windows 7 will “readdress those prices north.”

By the way, Bob Muglia, head of server and tools, projects that cloud computing could save a company 20% on IT, primarily in people costs. For Microsoft, it could increase sales from each account since it’s providing the hardware, the software and the people, but at a lower margin.