Microsoft and Yahoo!: My $.02 Worth.

microhoo.jpg

Everybody and their little brother is all over this. Heck, it even managed to knock all the MacBook Air fawning/despising off the charts. Like most major issues, there seem to be opinions lining up on one side or the other, with few voices in the middle.

First off, this deal is not done. One has to think there were better ways for Microsoft to go about it. Seriously, are these the best steps in trying to “merge” with another tech company:

  1. Talk for 18 months until you’re blue in the face but got nowhere.
  2. Know that the company does not really want to merge with you (someone, yes, but not you).
  3. Know that they have other interested parties, may even be somewhat close to deals, and then strike.
  4. Know they just had a bad quarter, so strike.
  5. Make an offer and tell their board they have only two days to respond. Two days!? That’s a big “screw you” if ever there was one.
  6. Go public with the offer.

There’s little question Microsoft is counting on the shareholders to be short-sighted/stupid/greedy enough to see the big dollars and mow down any objections by the board. Sure, the board may resist it that much more, but Microsoft is relying on their name (which some people still think means something), and their money to overcome that.

If the above works, while they may skate through US approval the EU will be another hurdle. It’s possible that even with board “approval” this deal could be scuttled or altered considerably.

But let’s assume we get past all that and the merger does take place. What’s next? The real debate is in what we can expect from “Microhoo” (Micro Who?). There has been a lot written from the usual suspects, and it bears discussion.

Paul Thurrott weighed in with his thoughts on it. Paul loves it. A little too enthusiastically, if you ask me. He’s realistic about it being a hostile bid, etc., but ultimately concludes:

I support Microsoft’s efforts to purchase Yahoo and combine that company’s assets with its Live services business. Both companies have an interesting mix of online products and services, but Microsoft desperately needs to embrace the move to cloud computing and stop hedging its bets in that area by focusing too much on its traditional and aging core businesses

Agreed about MS getting out of their “aging core business”. But that’s not so easily bought. MS has taken their shots at the web, search, ads, etc. and they’re just not good at it. Buying Yahoo! won’t necessarily make them any better. It may, however, make Yahoo! bad (or at least worse).

Make no mistake, Microsoft has pulled off plenty of successful acquisitions. PowerPoint was a Mac product they made a cornerstone of their Office dynasty. The Visio grab was a success. And Hotmail. Oh, and there’s this little browser known as Mosaic… Granted, these are trivial compared to something like Yahoo, but those immediately writing this off solely by virtue of it being an acquisition should be looking further.

Fake Steve Jobs posted his analysis as well. Typical of a FSJ essay, it’s well-written and has cute analogies (mating elephants!). I think FSJ’s view will be the popular one among not only Google and Apple supporters, but among naysayers in general. FSJ concludes thusly:

Ballmer said he loved when his rivals merged, because whenever the also-rans in any market start teaming up they might as well be waving a white flag. Because it’s over. You’ve beaten them. You’ve driven them to despair. They haven’t been able to beat you on their own; there’s no way they’ll do it together…

I’ll never forget it. But I guess he has.

Let’s not read too much into Ballmer’s comments, shall we? He said what you typically say when competitors band against you. Big deal. As a CEO, all your competition’s moves are stupid, desperate, too much overlap, incompatible, will hurt consumers, etc. Meanwhile, all your acquisitions are strategic, a good match, synergistic, etc. It’s corporate speak. So what? FSJ hanging his essay on that is a bit weak. Besides, if you want to see some real corporate speak — with serious undertones of fear-mongering — just look at the foo being slung by Google in response to this deal.

FSJ (and others) are absolutely right when they say this merger is huge. But no one disputes that. In fact, the different cultures only scratch the surface of the thing. The different technologies are likely an even bigger barrier.

Microsoft interfacing with FeeeBSD? That’s gotta be a shock to the Redmond system. They ported all their Hotmail stuff over after they acquired it, and that was a painful process. Yet it was nothing compared to this. They can’t really expect to bring Yahoo! all under Windows, can they? No way. And yet, if not then they have to make it interoperable. How do you do that gracefully when you’ve been claiming such an OS is inferior, less secure, etc. all your life?

While Thurott and FSJ took opposite positions, and many will line up in one camp or another, I much prefer the articles from Microsoft Watch’s Joe Wilcox (he’s written several, and isn’t done). I recommend the series of articles he’s written so far. They’re the kind of writing for which I used to have Microsoft Watch in my Blogroll. Some time last quarter Joe became a raving Apple-basher (the change was pretty dramatic) but I still subscribe to the feed; articles like these are why I continue to do so.

For example, Joe’s first question is why Microsoft made the deal now:

The question isn’t trivial. Microsoft has been looking at a possible Yahoo merger for about 18 months.

The announcement had to come no later than today, or not any time soon. …Microsoft CEO Steve Ballmer and Chief Financial Officer Chris Liddell are scheduled to offer their semiannual Microsoft report to financial analysts on Monday in New York… By announcing the bid today, Microsoft already has set some of the agenda for Monday’s important meeting, giving financial analysts the weekend to number-crunch the deal and prepare questions for Ballmer and Liddell.

Subsequent articles in the series discuss whether Microsoft had to make this move, the huge integration issues faced with the merger, and if Yahoo! is really worth the risk.

In Joe’s world, this deal is just as huge, hostile, challenging, difficult, etc. as anybody else is saying, but it can’t be conveniently summed up. It’s not some sort of panacea as Thurrott seems to imply, nor is it impossible as FSJ would have you believe. Joe looks at it from numerous angles, and in detail others have not, with interesting views on them all.

I certainly don’t agree with all his views. For example, I agree the online ad market is young, there are many Internet ad sources not yet begun, and Google does not have all the tools and answers; but stop telling me this means Microsoft is not competing with Google.

But I appreciate Joe’s articles because they focus not on the black and white points others have, but rather the gray areas in which this deal will ultimately prove effective, or a disaster. As always, the devil’s in the details.

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8 thoughts on “Microsoft and Yahoo!: My $.02 Worth.

  1. what recomendation would you give based on your analysis regarding the actions the company should take take to address these issues both incase if they go for a merger and if they dont.

  2. [Why does Microsoft think it has to compete on every single front in every aspect of the computing business? They have no focus, no core strengths, and no reason to be in most of the businesses they are engaged in other than the knee-jerk reaction to others successes.]

    The need to control everything, because they can not control anything. The need to destroy everything that they can not control.

    BTW, I’m not against companies making money. I’m against MS having money. They are not interested in making money.

    Has anyone ever noticed that MS likes to KILL things?

    Kill Digital Research. Kill Stacker. Kill Netscape. Kill PS3. Kill the baby [Qt]. Kill Apple. Kill Google. Kill the guy that left for Google. Kill Connectix. Kill VirtualPC. Kill an office chair.

    When everything and everyone has been killed by Microsoft, will the officers of MS be safe from Microsoft?

    If MS needs the world to go away, then why don’t THEY move to a deserted island?

  3. I really, really hope this deal goes through as it is the dumbest move Microsoft could ever make and could (cross-fingers) possibly sink them. Why does Microsoft think it has to compete on every single front in every aspect of the computing business? They have no focus, no core strengths, and no reason to be in most of the businesses they are engaged in other than the knee-jerk reaction to others successes. They might as well try building automobiles or selling hand cream. It makes about as much sense as getting into advertising. 🙂

  4. I would agree with you, but I don’t think Microsoft really considered Google a big threat until their cloud computing concept, in much the same way Microsoft didn’t really turn their attention onto gaming consoles until Sony started to draw away people from PC gaming. Microsoft, at seems to me, tries to compete with companies that threaten their livelihood in office software or Windows. Cloud computing also threatened their operating system model because you don’t necessarily need Windows to run an app in a browser.

    Search is Google’s strong suit, so it’s natural for Microsoft to fight them on that front. You kill Google’s search dominance and you kill their cloud computing concept. All of this is academic for me. Perhaps you have more concrete evidence to the contrary, but that’s what it looks like to me.

  5. Lightstab,

    I don’t think Cloud Computing has that much to do with it. I believe MS’ Office empire is safe for quite some time.

    Rather, I think this is all about ads. Search, yes, but only to the extent that it helps ads. TV, newspaper, and magazine ad revenue has yet to make big moves into the web ad space. There are literally billions still untapped. MS is preparing to fight Google on the next ad level.

  6. @Lightstab

    Agree. Their cash horde is dwindling, even before the Yahoo! deal. I think this will go down as the greatest blunder in technology history. There is so much wrong with this deal. If MSFT can’t create a product with all they money and talent they already have, what is buying Yahoo! going to do, especially when they run OSS?

    MSFT is getting desperate. The emperor now knows they are not wearing clothes to want to do this deal. Good for them. A quicker demise of the evil empire.

  7. I’ve always seen “cloud computing” as the new vaporware. It might work, but there has been no clear evidence that people actually want it. There hasn’t been a significant amount of corporations transitioning to Google Docs, and if Google didn’t have that motto to “Do No Evil,” I would write off the concept as a diversionary tactic used by Google to steer Microsoft into a big trap, in much the same way the US steered the Soviets into overspending with the “Star Wars” threat.

    I’m hoping that the deal goes through, because if it does, Microsoft will be dumping their threatening cash reserve. More than likely, it will be a failure. Microsoft will never have the mindshare that Google has in the internet space and their internal culture can’t deliver the kind of ironclad software required to do cloud computing. Lest we forget the security holocaust of the Windows operating system.

  8. Don’t know why Tom, but it seems like I’m on your case tonight (Sydney time) …

    No doubt you put “merge” in quotation marks to insinuate either “takeover” or “hostile takeover”, which would render points – 1 through to 6 not only as quixotic but null and void in the world of commerce.

    “There’s little question Microsoft is counting on the shareholders to be short-sighted/stupid/greedy enough to see the big dollars and mow down any objections by the board…” Again, this is the machinations of takeover bids, provide an offer that induces and encourages your target’s shareholders.

    I am not giving an opinion regarding a Microsoft / Yahoo! deal, just trying to uphold and conserve clarity, besides that, I despise M$ and its horde of flunkies.

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