Fortune magazine asks why Microsoft can’t make money online, and shares some striking numbers: The company’s Online Services unit, which includes Live Search, aQuantive, and the MSN portal, lost $480 million in the quarter that ended September 30th — 80% more than the same quarter a year ago. Ouch!

Why the struggles? The article suggests that Microsoft is trying to do too much online, and that, by being so late to the search game, it’s playing an impossible game of catch-up to Google:

“Microsoft may have been noodling on the web since the 1990s, but it was only four years ago that the company woke up to the need to compete in search – where a disproportionate share of online profits are today. Hence it is the new kid on that block, a tough place to be in a world where Google is as much the neighborhood bully as Microsoft is in PC software.”

Speaking of Microsoft and playing catch-up, Mobile Devices Today responds to recent rumors that a Microsoft phone is on the way by saying it’s not gonna happen anytime soon.

AllThingsD talks to a couple insiders, who say the Yahoo-AOL deal is “tabled,” “back-burnered,” and “like trying to catch a falling knife.” The main problem, as you might imagine, is the confusion and changes atop Yahoo recently, and the slowdown in online ad spending isn’t making things any easier. AllThingsD says both sides are still interested, but the price and structure of a deal are major disagreements right now.

Speaking of the economic slowdown, it hit Technorati this week. In an official blog post, CEO Richard Jalichandra says the company laid off six employees this week, including two executives, and won’t replace two other departed staffers. He also says the remaining staff has agreed to pay cuts: 15-25% for management and 10% for the rest of the staff. “We simply need a leaner and reconfigured mix to get us through 2009,” Jalichandra writes.

On that not-so-cheery note, I’ll say Happy Thanksgiving to our U.S. readers. See you on the other side of the holiday!

Related Topics: Search Biz