Another Look at Microsoft and Yahoo
"I feel the earth move under my feet
I feel the sky tumbling down, tumbling down"
-- from "I Feel the Earth Move" by Carole King
We've had a little bit of both the last few days -- moving earth and tumbling
sky. (And, yes, RCPU apologizes to our more macho readers for quoting an artist
as...uh, sensitive as Carole King two days after the Super Bowl. Hey, we're
feeling introspective.) First, the earth moved on Friday, as Microsoft (finally)
proposed a $44.6
billion buyout of Yahoo. Hey, that much money in that many briefcases hitting
a boardroom table would make anybody's floor shake.
Then, of course, the sky tumbled down -- at least here in New England, where
the local football eleven, the Patriots, will not come home to a celebration
of a perfect season but rather to slate-gray skies and a renewed Bostonian sense
of inferiority toward New York thanks to the Giants' Super Bowl victory. Oh,
well. At least we still have the Red Sox here in Boston, although it feels right
now as though they won the 2007 World Series approximately 437 years ago. Collectively,
we're all a little down around here.
Anyway, given that this is RCPU and not ESPN.com, we'll focus on the moving
earth of Microsoft's bid for Yahoo -- the name of which, as always, we mention
here sans obnoxious exclamation point. Redmond's bid to take on Google (with
which, as you might imagine, Google is none
too pleased) is the one story that has competed with the Super Bowl and
Super Tuesday for newsprint and online eyeballs the last few days.
Fortunately for Microsoft, government regulators on both sides of the globe
seem, for now, uninterested
in blocking the potential deal. As for everybody else's reaction, the takes
have ranged from the ridiculous
to the sublime
to the indifferent,
and pretty much everything
Casually canvassing the Redmond Media Group cognoscenti, RCP Editor
in Chief Scott Bekker wondered not just whether Microsoft and Yahoo would ever
be able to integrate, but also how much sense it makes for two companies that
are both losing ground to Google to combine with the goal of catching Google.
Can the blind lead the blind? Ed Scannell, industry veteran and editor of Redmond
magazine, RCP's sister magazine geared toward IT types, posited that Microsoft
might need to change its hostile attitude toward open source if it plans to
buy what is essentially an open source company.
Here at RCPU, we're mindful of a couple of things. First of all, the proposed
takeover isn't a done deal. Let's not forget that -- especially given news this
week that Yahoo might
not be so excited about a Redmond takeover after all. Beyond that, let's
not forget to note how staggering Microsoft's offer really is. The company would
likely have to borrow
money for the first time ever in order to pull off the deal, and the price
tag, at upwards of $40 billion, dwarfs that of Microsoft's biggest acquisition
to date: that of online
ad firm aQuantive.
We're also wondering to what extent the Yahoo bid plays into something we've
discussed before -- Microsoft's attempt to move
the market to Web services rather than be moved by the market. Steve Ballmer's
still talking about Windows,
Office and servers as major revenue producers, but Microsoft's recent executive
hires and the potential $45 billion cash outlay for Yahoo seem to scream that
it's time to start thinking about the end of desktop software as we know it
and move to -- not just imagine -- a world in which most computing is delivered
via some sort of service.
Of course, for Microsoft, that would mean seriously downplaying the model and
the products that made the company what it is today -- and playing catch-up
to Google, a nimbler, more established (in Web 2.0 world, anyway) competitor.
None of that will be easy. Just ask IBM, which had considerable trouble shifting
its core business away from mainframes years ago.
But if anybody can pull it off, Redmond can. Windows and Office, while they
might not be the products of the future, are still cash cows in the present.
They could cover the cost of snapping up Yahoo, loans and all. And with new,
Web-savvy blood coming in to run things -- think Ray Ozzie and Stephen Elop
-- Microsoft seems serious about weaning itself off of a reliance on old, standby
So, what does all this mean for partners? Well, we're not sure yet. Nobody
is. It might be time, though, to start thinking of what your place in a Microsoft
SaaS universe will be and what kinds of transitions you'll have to take your
business through to get there. Then again, you probably should have been thinking
about that for a while, anyway.
Of course, a potential Microsoft-Yahoo deal could turn out to be a disaster,
or just a flop. But it could also be the catalyst to jumpstart a rivalry with
Google that could actually end up doing both companies and the industry as a
whole a lot of good.
That is, of course, if the deal happens. Like the Pats in the Super Bowl, nothing
is a sure thing.
How do you think a Microsoft-Yahoo deal would affect your business? Sound off
at [email protected].
Posted by Lee Pender on February 05, 2008 at 11:54 AM