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Microsoft + the Internet « Previous | |Next »
February 4, 2008

Microsoft is proposing to buy Yahoo and then to shoehorn Yahoo into itself. Yahoo is wounded, having announced financial results on Tuesday which, for the eighth quarter in a row, disappointed analysts. Microsoft, meanwhile, desperately wants to reinvent itself to meet the new online world, where people access a world of services on the internet, not through packaged software on a PC on their desk.

The proposal is disturbing. It is not just because Microsoft attempt to buy the internet as a way to move beyond the desktop and software into the internet will have merger problems. Or that Microsoft has a history of dubious and anti-competitive practices, that it is opposed to open source for its products, and that it does well by shutting out competitors rather than creating great things.

Or that it will cause significant problems for the internet partnerships of Yahoo7 and Ninemsn in Australia, due to Yahoo7 being a 50-50 joint venture between Seven Media and Yahoo!, while Nine's owner, PBL Media, and Microsoft each own half of Ninemsn.

The prize at stake of the takeover is the rapidly growing global on-line advertising market which is estimated at $42bn. It is that the deal means that the internet, that was a citizens domain, becomes a business one with two companies engaged in tracking and surveillance of our internet habits, clicks, and views to collect information on our buying habits. Yahoo has lost the battle for online search to Google and a merged Microsoft/Yahoo could start to develop the kind of integration between platform and applications.

Yahoo will probably wind up in Microsoft's clutches because the world's largest software maker appears to be a determined bidder with more financial firepower than just about every other conceivable suitor.The list of so-called "white knights" willing to come to Yahoo's rescue appears to be dwindling---News Corp, AT&T and Comcast, reportedly have no interest in trying to top Microsoft's bid. Will Yahoo dangle the prospect of a Google partnership to persuade Microsoft to raise its bid and then accept the higher offer?

| Posted by Gary Sauer-Thompson at 7:23 AM | | Comments (2)


Microsoft fails to create any competitive products of its own, so the company responds by doing what it knows best: - picking up a rival at exactly the right time. Microsoft will have purchased Yahoo for a fraction of what it was once worth.

It will get a great deal for its small outlay. Microhoo would have about 30 percent of the search market, compared to Google's 60 percent, and the the second largest online ad network. In Yahoo, Microsoft is also getting the most popular e-mail, news site, finance and photo sites on the Web.

Remember when Time-Warner and AOL merged and that was going to become the internet powerhouse? The big question will be not just the numbercrunching of advertising market share, but whether the Redmond culture can thrive in Silicon valley, and vice versa, or whether it will prove toxic to innovation.

John Markoff in the NYTimes on Saturday observed:

"In moving to buy Yahoo, Microsoft may be firing the final shot of yesterday’s war.

"That one was over Internet search advertising, a booming category in which both Microsoft and Yahoo were humble and distant also-rans behind Google.

"Microsoft may see Yahoo as its last best chance to catch up. But for all its size and ambition, the bid has not been greeted with enthusiasm. That may be because Silicon Valley favors bottom-up innovation instead of growth by acquisition. The region’s investment money and brain power are tuned to start-ups that can anticipate the next big thing rather than chase the last one.

"And what will touch off the next battle? Maybe it will be a low-power microprocessor, code-named Silverthorne, that Intel plans to announce Monday. It is designed for a new wave of hand-held wireless devices that Silicon Valley hopes will touch off the next wave of software innovation.

"Or maybe it will be something else entirely."

If I were Bill Gates I'd be quietly selling down my Microsoft shares as fast as I could without spooking the market, although in its present state it's not clear what to put the money into instead.