Seriously, what possesses Steve Ballmer? Why risk his reputation, to say nothing of his shareholders’ well-being? Let’s forget the easy jibes, big egos, phallic insecurity.
Instead, let’s ask ourselves: What does the Microsoft Board of Directors know we don’t know?
They can’t be ill-informed, ill-advised, ill-intentioned or dumb. And yet, there are many obvious or should be obvious reasons why this forced marriage can’t work.
Technical, first. Microsoft uses Microsoft software, mostly. Yahoo uses Linux servers and applications, some Oracle bits. So, how do you “converge” mail, search, advertising services, shopping, instant messages? In the Valley we joke, at our own expense, saying much money has been lost because we said: It will work because it’d be cool if it did. Well, too often, it doesn’t. Do you want the job of merging two huge and already messy computing infrastructures?
Declaring a winner-take-all is a possible solution. Awright guys, everybody moves on this ship. You tell Yahoo Mail and Messenger customers their accounts are now on the new Hotmail at Live.com. Same user name and password and, for you, we redirect your old yahoo.com login automagically. Sounds easy. But moving millions of email accounts, billions of messages may be of such as scale as to be intractable. Users rarely respond well to being forced to switch. The welcome screens on Yahoo and on Microsoft’s Live.com feel very different and most users are reluctant to change their habits, especially when there is no clear benefit to doing so. So, now, multiply the technical and behavioral difficulties by the number of different platforms, portals, advertising systems, shopping sites, news, maps and search that have to be unified for the merger to work, to help MicroHoo become Number One. Microsoft directors are well aware of the challenge. That’s just the beginning.
We now turn to Culture Wars. Many in the Valley’s venture capital business rub their hand with glee. Boy, we had so much trouble getting engineers, marketing and sales people. We’re philanthropists, you see, this deal makes staffing our start-ups easier – and cheaper. Yes, here too, Ballmer sees the problem: in his letter to Yahoo he mentions “retention packages” for Yahoo “key personnel”. Does Steve refer to executives churning out PowerPoint slides or to the engineer in a cubicle who performs actual work, who knows where the corpses are buried in the source code? Techies have already kick-started the word processor and warmed-up their résumé.In Mountain View, it’s Christmas in January, wags want their company to change its name to Giggle. One individual calls the happy hallway gossip “cluster cluck”, delicate rhyming allusion to a more vulgar expression often used to describe such mergers, a cluster f–k.
Summarizing: Yahoo shareholders (and executives) take the money and run. Merged computer systems won’t run. Culture wars cause an exodus of real workers. VCs rejoice. Goggle giggles.Microsoft directors know this and still support Ballmer’s takeover of Yahoo. Why?
There aren’t many possible explanations. The simplest is this: We’re screwed. One, we can’t catch up with Google as we know it today. Two, we see Google’s long term strategy. They have the best large scale computer system on Earth (more than one million servers early 2008, running better than we know how to). Over time, with this “computer cloud”, Google offers (sells or sells advertising with) everyday services for people and businesses. This takes gold away from the Divine Earnings Stream: Office and Windows. More than $3bn, last quarter for applications alone, as much as Google’s total profit for one year.One has to admire Microsoft’s Board for doing what too few Boards do: real strategy. Yes, we make tons of money today but, from 10,000 feet high, we see the torpedoes. Too bad doing what we do won’t help, even with more money skill and energy, but that’s the way it is. We’re left with one move: buying the only other competitor left and hope we gain enough muscle to fight the Web’s new Microsoft, Google. It’ll work because it has to work.
“Mere matters of implementation” will get in the way, I’m afraid. – JLG
Further readings :
> The letter from Microsoft board’s to Yahoo’s
> Henri Blodget’s (yes, that’s him, the Internet Bubble repentito) strongly reasoned view, here.
> How Yahoo got lost in rival’s shadow, in the FT.com
> In The New York Times, “A giant bid that shows of how tired the giant is”
> The “Peanut Butter Manifesto”. On November 2006, a Yahoo senior vice-president wrote a memo outlining the company’s flaws. Interesting reading in retrospect. Full text on The Wall Street Journal or TechCrunch
> And, the always entertaining and extremely intelligent satire from Fake Steve Jobs
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