In a surprising statement, two Yahoo! executives admitted that they have lost the search battle to Google.

There are a number of rumours as to why Yahoo! might announce something like this.
Their earnings statement released last week fell far short of analysts’ hopes, that their stop dropped 12%. It still has not recovered.
Maybe they’re going for the sympathy vote, or perhaps they’re hoping that honesty will win them favour with their stockholders.
Personally, I think they’ve given up on being the best search engine, in order to focus their efforts on other markets. Their recent purchases of Flickr, and del.icio.us might be an indication of that. If so, this setback may only be designed to give Yahoo! time to regroup.