With its $44.6 billion bid for Yahoo, is Microsoft setting itself up for yet another Web misfire?
If one believes Steve Ballmer, the answer is a definite "no." It's a perfect match, he says. Advantages include bringing together Microsoft's significant software expertise with Yahoo's massive customer reach and page-view inventory. There will potentially be major savings -- totaling "at least" $1 billion per year -- after the two corporations combine search and advertising operations and unify their R&D efforts. Huge profits are to be made in online advertising: Kevin Johnson, Microsoft's president for Platform and Services, claimed in a conference call with analysts last Friday that the online advertising industry will grow to nearly $80 billion in the next three years. In the same session, he and other Microsoft executives uttered "synergy" and "opportunity" nearly 30 times -- clearly, Microsoft is very optimistic about the deal.
But haven't we seen this all before -- Microsoft spending huge chunks of cash to acquire online services or develop them on their own, only to see the synergy turn into mediocrity, and grand visions result in feeble efforts that ultimately fizzle? Remember all the initial buzz about the Hotmail acquisition? What about Passport and Microsoft's other "megaservices"? When is the last time you heard someone say how much they love using Internet Explorer? In all of these examples, big words, big plans, and big bucks did not translate into online success. When it comes to making its mark on the Web, Microsoft still seems to be engaged in a game of catch-up with rivals like Google and a host of nimble upstarts.
It must be noted that the Web was never a part of Microsoft's DNA. Microsoft grew from a startup to the world's largest software company thanks to its core businesses -- operating systems, PC software, and enterprise applications. Online came much later. Despite nearly 15 years of trying, Microsoft still hasn't yet figured out a model for Web success. Even if the Yahoo deal goes through, there's no guarantee it ever will.
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- Prediction: Yahoo to accept Microsoft acquisition
- Prediction: Yahoo! to launch Fire Eagle
- Analysis: Yahoo started small and grew fast
- Analysis: Microsoft-Yahoo deal will pass antitrust muster
Comments
Micro$oft's Unrealized Online WetDream is simply to OWN EVERYTHING, as the do in the desktop world !!! In a word - GREEDY !!! Greedy Gate$ and Balmy Ballmer want OWN EVERYTHING SO CONSUMERS HAVE NO CHOICE - THEY ONLY WAY THEY KNOW TO RUN A "BUSINESS" !!! They see a revenue stream and they want to STEAL IT !!! And when their PATHETIC EFFORTS TO "INNOVATE" turn out to be EXPENSIVE TURDS, they "leverage" their desktop monopoly to go and buy the competiton !!! The Feds must put a stop to this stifling of the innovations of others, and I suspect the upcoming Democratic President will do just that !!! And then investment and innovation in the Tech Sector will take off again !!!
Jim, why so bitter about Microsoft?
If Microsoft was so busy stifling the innovations of others, how do you explain the thousands of successful tech companies formed in just the past ten years? As for its supposed monoply, Microsoft enabled me and millions like me to more easily communicate and run our businesses with easy-to-use and pretty-good applications that became the standards. Products only become standards through broad market acceptance. And the market has chosen Microsoft.
Hey, some companies are great at innovating, some are great at leveraging the innovations of others, and a few companies are good at both. I think Microsoft and Yahoo! can be a winning combination, as long as MS doesn't constrict Yahoo! with it's matrix management structure, and as long as the government stays out of it entirely. The government has far too many other things it's busy screwing up than to bother with one company's acquisition of another.
Jim, why so bitter about Microsoft?
If Microsoft was so busy stifling the innovations of others, how do you explain the thousands of successful tech companies formed in just the past ten years? As for its supposed monoply, Microsoft enabled me and millions like me to more easily communicate and run our businesses with easy-to-use and pretty-good applications that became the standards. Products only become standards through broad market acceptance. And the market has chosen Microsoft.
Hey, some companies are great at innovating, some are great at leveraging the innovations of others, and a few companies are good at both. I think Microsoft and Yahoo! can be a winning combination, as long as MS doesn't constrict Yahoo! with it's matrix management structure, and as long as the government stays out of it entirely. The government has far too many other things it's busy screwing up than to bother with one company's acquisition of another.
Abbie, he's probably like me, an old school Unix computer guy whose worst nightmare would be to throw away his wonderful Unix tools, which he has used for decades, and replace them with Windows mumbo-jumbo, which always makes things about 10x more complex than they need to be.
Yahoo has always been about straightforwardly bringing in the content, in a way that's easy to work with and doesn't require a lot of complex manipulation on the part of the user. Microsoft has always been about making things complex, elaborate but not any more effective than Yahoo's simplistic approach. Yahoo has probably moved too slowly to embrace more modern ways of working, while Microsoft's main point is to force people to use Internet Explorer as their main web browser.
In a takeover, Microsoft will get what it wants. It will rewrite every line of Yahoo code in the Windows Live! style, and/or import all the Yahoo! data into the Windows Live! system and suddenly double Windows Live! market share overnight.
But will the customers go for it? Will they stick with Windows Live! or move elsewhere. It seems to me that they are likely to move elsewhere if they are asked to transfer to Live. After all, most of them have already considered and rejected Hotmail.
It seems likely that most of Yahoo's technical employees will abruptly disappear. They are not even qualified for the new jobs, which will involve developing in a completely different style and computing platform that they have learned to loathe pretty much since the advent of Windows 3.1.
It also seems likely that Google(tm) will throw out the welcome mat. This will mean that, effectively, Microsoft will pay $45 billion for employees and infrastructure, only to see the employees walking straight out the door. Google then gets them for free! Nice move, Microsoft. You only helped your biggest competitor get bigger.
In conclusion, then, Microsoft is buying Yahoo for the Internet-savvy attitudes of its employees, who will soon depart, and for the customers they now have, who will soon leave.
Who the heck thought this was a good idea?
D
I beg to differ with you , David. it is a great idea indeed for Microsoft to acquire Yahoo. Come on, Microsoft offered $44.6 billions !This is not a small sum of money to go and buy a company and then mess up with it. From a consumer 's perspective I believe these bring about new creactive services to the online business. It will bring about a higher quality of standard to those in this industry.
David, one thing I'd like to add about the employees staying/leaving is that while some employees may not be enthusiastic about the deal (see Wired's Epicenter writeup) Ballmer & Co. have anticipated this, and are prepared to "offer significant retention packages to [Yahoo's] engineers, key leaders and employees across all disciplines," according to Ballmer's original offer letter.
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