Microsoft Posts Profit Decrease, Ford in the Green for 4Q: Bizarro World Finance

July 24, 2009 at 11:58 am | Posted in Fun, Microsoft | Leave a comment

Does this feel like you’ve stepped into an alternate reality when you open the Wall St. Journal and the top 2 stories on the Marketplace page are “Microsoft Profit Skids 29%” and “Ford Navigates Path to Profitability”?  Gotta love the automotive analogy with “skids” vs. “navigates”.

BTW – I haven’t checked the historical quarterly data, but I don’t think a quarterly loss on OS right before a new version of Windows comes out is unusual (although 29% may be high).  This is the time of the highest expenses (as all hands are on deck for development and marketing expenses are gearing up) and lowest revenue (as buyers hold off until the new version).  Same goes for Office (down 13%) right before the new version of Office 2010 comes out in the first half of 2010. Still, Microsoft’s expectations were off.

Online you can see the stories, although not the comparative “skids” vs. “navigates” in the titles and telling downward red arrows for Microsoft and a green bar for Ford.  Here’s the link (but it’s only good for today, Friday 7/24/09 since it updates the the current day’s headlines each day).

MSFT down FORD up


A First Look at SharePoint 2010

July 18, 2009 at 8:48 am | Posted in Catalyst09, collaboration, Composite Applications, Microsoft, Microsoft SharePoint, Office | 17 Comments

The spigot on the information coming out of Microsoft about SharePoint 2010 was cranked up from a drip to a trickle on July 13th with the debut of the SharePoint 2010 web site. Microsoft has been promising to open it to a full-blown fire hose at the SharePoint Conference in October, but until then it’s worth going through what has been released. (there’s also an invitation-only technical preview).

First, before we get to features, there’s a new conceptual view. The old 2007 “SharePoint donut” got tons of usage since most everyone is at a loss to describe what SharePoint is without it. Sure, it’s a “collaboration server”, but what does it do? Well, let me whip out this diagram and walk through it …

Here’s my best guess so far on how the old donut maps to the new one. “Sites” is the most vague (statements like “Sites allows you to expand across environments” that describe capabilities rather than a definition). I think Sites is just a generic, catch-all bucket for anything involving creation of websites, so it overlaps with all the others.

SP2007 to 2010 mapping

Here are my takeaways from the main video (with marketing-speak omitted except where I found it interesting or telling). I’ll be clear where I’m injecting my own point of view by using [brackets], although the rest is paraphrased so what you see here is filtered through my own perspective. I encourage you to view the videos yourself as well.

Sharepoint 2010 Overview (Tom Rizzo)

  • Mentions how they are supporting all browsers (although he tellingly stumbles when trying to say “Safari” … )
  • Promises great strides in social computing
  • Went around the SharePoint 2010 donut:
    • Sites
      • Sites are all about sharing information
      • Mentions a further push into extranets and internet sites
    • Communities
      • Plans to support a hierarchical structure of communities
      • “Regardless of how they come together” [implies to me embracing end user creation and maintenance of their own communities rather than just enabling administrators to create communities]
    • Content
      • People-centric, LOB-centric
      • “We’ve been Working hard to manage content from creation to disposition and destruction … ”
      • Will enhance ability of users to discover content
      • [our analysis of SharePoint 2007’s enterprise content management showed weakness at the later stages of the process , so beefing up capabilites around disposition and discovery seem to show positive action from Microsoft to close the gap]
    • Search
      • FAST will be combined with existing SharePoint search.
      • More investments have been made in uncovering hidden assets
      • People search will be (better) blended with search.
      • At 8:22 he says “You’ll be able to find rich people across your organization”. [I guess that’s handy if Bill Gates works at your company and you need to borrow money for lunch]
      • There’s a plug for the business connectivity services (formerly business data catalog) in terms of searching structured data
    • Insights
      • Combining the rest of SharePoint with the business intelligence stack. [not really any detail here, or nothing new to talk about]
    • Composites
      • “Rapidly create dynamic bus solutions” [At the SharePoint conference in 2006, none other than Bill Gates said building composites is the #1 capability of SharePoint. If they’re going to get away from the “portal” word which is increasingly watered down then this is a good choice. Composite applications encompasses portals, but also other important styles of web apps made from piece parts including any type of assembly of web services or RESTful services, mashups, or business process management]
  • Features shown in the demo
    • User interface
      • The Office ribbon now shows up all over SharePoint and is removable, customizable, contextual
      • He showed live editing of text in a website, and as you mouse over different font sizes you get preview of fonts just like in Word 2007
      • He showed a very fat client-like resizing of images, adding a border, etc.
      • You can add Silverlight with an out of box Silverlight web part
      • There’s the ability to apply PowerPoint themes to sites (colors, fonts, etc.)
    • Business connectivity
      • You’ll be able to put a Visio diagram directly in SP, and since Visio can have links to get live data from business systems that means live data too [neat!]
      • Forget BDC: it’s now BCS. There’s a new acronym: Business Connectivity Services (BCS) to replace the business data catalog (BDC)
      • Instead of just sites in SP designer 2010, it has lists, workflows, etc.
      • Also has an item in SP designer called “entities” for creating connections to bus data
      • Demoed a SQL connecter that auto-creates CRUD (create, read, update, delete)
      • You cal see a BCS data set in SharePoint and it looks like a list, but it’s a SQL database. Demoed filtering.
      • You can also click “edit item” and update the item. [I hope they improve the interface. It refreshes and fills the whole screen with a data dump of the row. Not at all like editing in a cell]
      • Demoed creating a new doc from SharePoint in Word which has a bunch of fields defined in BCS. You can select a customer name from the list and it fills in all the fields from that record in the document information panel
    • Work with data in richer ways
      • Microsoft finally clarified that Groove (new name=SharePoint Workplace) is the rich client for SharePoint. [wow, that took a long time for something we knew was going to happen]
      • Workplace can sync info from a SharePoint site
      • Showed in SP workspace how he can edit info offline, and then synced back up by selecting “Connect to server” and “Sync supplier list”. [Not sure why its so manual. In Notes you don’t have to hit “connect” then “sync”. Maybe there are automated, scheduled options too that weren’t shown. I hope so]
    • Tom emphasized that these are just some of the features – not an exhaustive list.

SP 2010 for IT professional video (Richard Riley)

  • He mentioned on premise or as SaaS
  • Beta later this year, general availability 1st half of 2010
  • Goal is to scale up and out with high reliability [just as Bill Pray noted in his thoughts on Exchange 2010, it seems many of the administrative enhancements for SharePoint 2010 are to help it support SaaS rather than to just help current on premises installations]
  • [bookmark] IT professional productivity
    • Central admin: he mentioned “easier to find” and ribbon UI [he didn’t mention any actual functionality changes]
    • There’s a best practice analyzer
      • It analyzes health, performance, and has reporting
      • Rules can regularly run and send pop ups with issues encountered. Admins can build rules and automatically apply fixes
      • There is a new logging database, extensible with custom data and custom reports
  • Scalable unified infrastructure
    • Large lists will not hang the system anymore [yahoo!]
    • The admin can set thresholds for how many rows max will be returned. And there’s a “happy hour” when you can get larger responses from queries.
  • Unattached content database recovery
    • Admins can browse content in repositories, create an export, and upload to list
  • Flexible deployment
    • You can detach a 2007 database and attach it to 2010
    • When you migrate to 2010 it keeps UI the same, but you can select an option to switch user experiences

SP 2010 for Developer (Paul Andrew)

  • Developer productivity
    • Paul talked about the Visual Studio 2010 SharePoint tools
    • There is a new visual Web Part designer and team foundation server
    • You can look at lists and other server items from the server explorer within VS without having to go to SharePoint
    • Can specify deployment configuration such as a package WSP file that can include custom installation steps
    • Demoed click and drag creation of a Web Part with a button that calls LINQ query
  • Rich platform
    • There is the ability to use LINQ to access SharePoint lists including joins
    • The new client object model can be used to run code on the client machine (.NET, Javascript, Silverlight)
    • Paul also mentioned the Silverlight Web Part and business connectivity services
  • Flexible deployment
    • Paul talked about solution deployment [but frankly I got distracted at this point and don’t have notes here. I believe this is an attempt to address SP2007 weaknesses around staging from test to QA to production]

Data connectivity services

  • In the demos, DCS still showed as BDC in VS 2010 since it’s not finished yet
  • Paul showed how it supports creating methods for BCS CRUD
  • In SharePoint you can create an “external list” now, which means data from the BCS
  • There are new “list” menus in the ribbon bar in the SharePoint web UI
  • Demoed using Silverlight to fill a data grid with data from a SharePoint list. With Silverlight, it’s running on the client so things like sorting the list are done without calls back to the server

That’s a summary of what I took away from the latest information on SharePoint.  At our SharePoint Workshop (SharePoint 2007: The Current Governance Nightmare—and Will It Get Better?) on July 28th at Catalyst we have added a module on what’s new in SharePoint 2010 that includes our statements on what we thought was missing from 2007.  Seeing new stuff is great, but lining it up against the weaknesses in 2007 provides a better view of the progress being made.  All said though, it’s still too early to stand up and applaud.  There’s a lot more information left in the tank that has to trickle out first.

What Microsoft Office 14 Needs: A New, Separate SKU

March 15, 2009 at 12:11 pm | Posted in Blogs, Content Management, Microsoft, Microsoft SharePoint, Office, Web 2.0 | Leave a comment

Recently I posted some guesses as to what features Microsoft will put into Office 14’s content creation tools (the productivity suite consisting of Word, Excel, PowerPoint, OneNote).  But those were guesses about what Microsoft would do, not what they could do or should do. 

There’s a lot of interest in O14 since professional pundits (and swivel-chair pundits in fuzzy cubicles everywhere) want to speculate about whether the 800 pound gorilla known as Microsoft Office can be brought down by plucky upstarts like Google or Zoho, or free options like OpenOffice or IBM Symphony. But this speculation is misplaced.  I start the NextGen authoring section of my content creation seminar with a prediction:

If Microsoft is ever dethroned in the content creation market, it will not be because they were beat on features or marketing … it will be because of a fundamental shift in the content creation market for which they failed to adapt.

In other words, it is not Vendor X that will beat them by being cheaper or more feature rich.  It’s Suite X that will beat them with a different set of technologies that addresses a unique but growing subset of content creators.  There is a fundamental shift in how content is being created.  It has bubbled up from old concepts such as collaborative editing and been picked up by web 2.0 and its Gen Y adherents who think in rapidly produced, hyperlinked, searchable content chunks instead of ponderous, static, e-mailed documents. I introduced the NextGen content creation trends here (with further description here).  This is how I see the content creation environment today:

Next gen trends fig1 bg

Note that I chose to visualize this as a central core being expanded by these new needs rather than a versioning depiction such as 1.0 —> 2.0.  That’s because the core needs will always exist in enterprises, but we need to acknowledge a new set of needs that is not well met by the core authoring tools and that will account for an increasing percentage of content creation as Gen Y’ers enter the workforce and information workers get used to authoring in new ways via blogs and wikis.

We are at an inflection point in the way content is being created.  Microsoft would be unwise to pass up this opportunity to segment the market.  Microsoft may be able to get through one more major version of Office by stretching traditional document-related technology to fit.  But this anchors their attempts to address new content creation needs to a 1990’s document-centric mindset.  By carving out a new target market, they build incremental revenue (most buyers of this suite would still have needs for core Office as well), plant the seeds for a new franchise that would be small but grow more rapidly than Office, and compete better with innovative vendors that are unencumbered by entrenched bureaucracy and sunk costs.  And all while helping to mitigate the bloat and complexity of Office by separating out features that will be unused or confusing for many core Office users. There’s a chance that this would cannibalize Office 14 upgrades, but my instinct is that it would make no or a minor short term loss (since the new target market is small) and pay for itself within the next two versions of Office. It could be rolled out on half-cycles with Office to help avoid cannibalization and steady the famously spiky revenue stream and attention that Office releases garner.

Accordingly, I argue that Microsoft should create a new product (a SKU in industry parlance) for the NextGen content tools rather than continually trying to bolt onto Office Pro.  It could be called Office Extended, although some more thinking would elicit a more clever term.  Here’s how I would start:

  • OneNote would shift over to anchor the new suite.  With new branding and development, it can finally stand up as a new type of content platform that allows for content components, real-time collaborative authoring, and improved linking rather than just being a productivity add-on aimed at students and meeting notes.  OneNote will only be truly understood to represent a different paradigm when it breaks the chain it has to the Office Home and Student suite
  • The Live Writer blogging tool would finally get a real home here
  • Microsoft would have a place to create a real wiki rather than the SharePoint template that stands in as the official “Microsoft wiki” for lack of anything better.  No one – not even SharePoint folks – asserts that SharePoint’s wikis are in the league of any best of breed tools, and I can’t think why Microsoft would not want to compete for a best of breed wiki any less than they want to have a best of breed browser.  And remember the pain that being too slow to recognize a “good enough” 80/20 browser wasn’t enough caused them.
  • Microsoft would take an 80/20 swipe at the XML content creation market with a new Xmetal-like tool, much as they grabbed a new low end of the records management market with Microsoft Office SharePoint Server 2007

And that’s just a start.  Part of the idea is to give this new market segment a new matching suite to grow with.  This idea fits Microsoft’s software+services direction since a few of these products (wikis and blogs) are not purely client-based, so services are needed.  I guarantee the evolution of content creation is not over, so the new SKU provides a place with plenty of room to stretch and grow new creation mechanisms the market demands without having to add a 14th pound of flour to the 10 pound bag of Office.

Note: This is a cross-posting from the Collaboration and Content Strategies blog.

Some Un-educated Guesses about Office 14

March 12, 2009 at 3:54 pm | Posted in Content Management, Information Work, Microsoft, Office | Leave a comment

I posted some guesses about what will be in Office 14 over at the Collaboration and Content Strategies blog.  As I said there, these are totally un-educated guesses since I haven’t been briefed on it yet.  Here’s the quick summary of my guesses on the productivity part:


  • Breaking down some barriers in moving content to/from the web
  • Better leveraging / integration of OneNote
  • Tighter SharePoint integration with the productivity side of Office
  • Better use of XML schemas
  • Better tagging and use of controlled vocabulary across the suite
  • Web editors with Silverlight
  • Real-time collaborative editing

All well and good, but I’ll be doing another posting on what I think they could do with Office.  Here’s a hint: It involves a new SKU (product that you pay for) …

Complimentary Burton Group Public Seminar: The Present and Future of Content Creation

February 11, 2009 at 1:17 pm | Posted in Content Management, Enterprise 2.0, Information Work, Microsoft, Office, Web 2.0 | 1 Comment

For those of you in the Chicago area I wanted to point out a free seminar I’ll be doing in March.  I hope to see you there.

Complimentary Burton Group Public Seminar
Hosted by: Baxter Credit Union

The Present and Future of Content Creation

Wednesday, March 11, 2008 from 9:00 AM until 11:30 AM
Baxter Credit Union
340 North Milwaukee Avenue
Vernon Hills, IL 60061
Click here for map

Seminar Attendees Receive Complimentary Report
Productivity Suite Proliferation: Is It Time to Ditch Microsoft Office?
by Guy Creese

Content Authoring in the Enterprise 2.0 Age
By Craig Roth

Featuring Presentations by Burton Group Analyst: Craig Roth

Craig Roth, Service Director for Collaboration and Content Strategies, will describe how new content authoring, collaboration, aggregating, publishing, and searching technologies are impacting the writing process, and the challenges on the horizon for content authoring in the Enterprise 2.0 age.

Productivity Suite Proliferation: Is it Time to Ditch Microsoft Office?
Microsoft Office has long dominated the productivity suite market. While it still “owns” the market, enterprises looking for a product for creating documents, spreadsheets, and presentations now have many alternatives to pick from. This overview will look at software (e.g., WordPerfect,, and Lotus Symphony) and SaaS alternatives (e.g., Google Apps, Think Free, and Zoho) and discuss whether now is the time to replace Microsoft Office and put something else in its place.

Will the Traditional Productivity Suite Still Matter in 2010
Content authoring technology, such as Microsoft Word and PowerPoint, was originally just a tool that enabled the authoring process. However, with functional enhancements in the basic productivity suite, increased interest in brainstorming and mind-mapping tools, and the emergence of Web 2.0 authoring tools, it is now apparent that technology is changing how we write and what we write, even though information workers may not always be conscious of its effect.

Please RSVP by March 9, 2009 to: Curtis Carter at 801-304-8111 or

Why Is Governance Pain So Common With SharePoint?

February 5, 2009 at 3:47 pm | Posted in Governance, Intranet, Microsoft, Microsoft SharePoint | Leave a comment

Governance problems have plagued all sorts of websites, but in my experience they seem to come up disproportionately in SharePoint installations.  In researching and writing my new document “Website Governance: Guidance for Portals, SharePoint, and Intranets” (slated for publication in March) I wanted to figure out why that is.  Here is what I found out about why SharePoint has proven to be particularly vulnerable to chaos when ungoverned:

  • Ease of deployment: SharePoint is easier to license and install than other portal products.  That’s great, except more parts of the organization will be tempted to set up servers. Decentralized installation and setup of the servers often leads to siloed installations that do not conform to the organization’s best practices or technology standards.
  • Grass roots nature: SharePoint’s ease of use has proven to be a double-edged sword. While it opens up self-help collaboration and content capabilities for a broader swath of information workers, it also places creation in the hands of a large number of non-IT users who are only minimally monitored. This can lead to poor findability and an inconsistent user experience.
  • Lack of multi-farm management: SharePoint lacks enterprise-wide management features that other portal products have had for years. The highest level of management in SharePoint is the server farm, but enterprises wanting unified policies and governance across multiple server farms have few tools to accomplish this. Microsoft has made a step to remedy this situation with a Cross-Site Configurator that was specifically developed “in the context of IT management challenges that have arisen with the rapid growth of SharePoint deployments.” However this product is unsupported for now and is not a part of the official WSS build.
  • Frequent overlaps with other installed capabilities: SharePoint provides an integrated set of capabilities that often exist in separate products that an organization may already have installed. A team that has been managing a content management, search, collaboration, or portal system for years may wake up one day to find users starting to leverage SharePoint for the same capabilities. The result is information segregation and a quick call to the CIO to make a decision on coexistence or shutting down one of the overlapping alternatives.

This doesn’t mean that SharePoint cannot be governed.  But they do point to the importance of creating a statement of governance early in the planning cycle for SharePoint.  While some large SharePoint deployments rise above all these problems, it is rare and difficult for them to do so without a governance structure in place.

SharePoint: It’s Not a Gap, It’s Room for An Ecosystem

October 15, 2008 at 1:33 pm | Posted in collaboration, Content Management, Microsoft, Microsoft SharePoint, portals | 2 Comments

There’s an old coding joke: when presented with a bug in your program you try to pretend it is intentional by saying “It’s not a bug, it’s a feature!”  I’m reminded of that when told about the rich ecosystem Microsoft has nurtured around SharePoint 2007.  More information is coming out about the parts of SharePoint where a sophisticated enterprise has to look outside of what is in the box, such as our half day of sessions at Catalyst entitled “SharePoint: Fixing a Hole Where the Pain Gets In” or this article today in InternetNews.  And the more that information comes out, the more I think back to that old coding joke, except now it is Microsoft saying “It’s not a gap, it’s room for an ecosystem!”

Now, I am not saying that all gaps in SharePoint are mistakes.  Honestly, I don’t know how many of the gaps filled by the ecosystem are due to intentionally leaving some portions of SharePoint to communities, developers, and vendors and how many simply happened because Microsoft didn’t forsee common needs that it should have.  It’s probably some of both.  The best way to determine that for yourself is to look at the feature sets from the long and growing list of partners filling gaps in SharePoint (not just integrating, but filling gaps) and determine if those are niche needs that a vendor should correctly leave to the ecosystem or basic needs that should be included to fit the way the vendor advertises its product should be used.

Too many SharePoint implementations wind up causing pain because a promising demo or proof of concept led planners to underestimate the difficulty of the full solution.  The same implementation might have been considered a roaring success if time and resources were understood upfront and did not follow a winding path with multiple failures before completion.  If you’re in charge of an enterprise-wide SharePoint plan or a specific SharePoint site, you don’t care if a gap in SharePoint is intentional or not. The task for you is to quickly assess what users will need from SharePoint and to set expectations up front that SharePoint out of the box may not get them there.  Determining what combination of built-in SharePoint capabilities, partner products, community-provided bits, and custom in-house coding will be required to deliver the expectations of the users will help paint a realistic picture of the time and resources needed. 

To summarize, perhaps a cartoon (from our Catalyst track) will help:

SP Ecosystem

Note: This is a cross-posting from the Collaboration and Content Strategies blog.

Microsoft’s Mojave Experiment: Proves Vista is Great or "Vista" is An Anchor?

July 31, 2008 at 7:14 am | Posted in Microsoft | 1 Comment

Have you seen the Mojave Experiment?  Let me sum it up for you: It demonstrates that consumers are more favorable to Microsoft Vista when its name is hidden.

The Dana Epp blog entry that brought this to my attention uses this as proof of Microsoft’s superiority (“So imagine the surprise when the users found out it was actually Vista that they were using! I love it”). But Microsoft is acting just like the techo-geeks they are accused of being if they are ecstatic about this one, bragging about technology while missing the real point.

The most powerful asset of a company like Apple or Microsoft is its brand.  People can come and go, designers can get a hot hand or go cold for a while, but look at Apple from a brand point of view.  The Apple mystique and cool attracts the right employees and sugar coats their products’ entry into the marketplace.  What this experiment proves is how bad the brand equity of the “Vista” name is despite oodles of dollars in marketing.  And, by proxy, how low the brand equity of “Windows” is right now too.  Judging by the clips on this website, I’d go so far as to say Vista has negative brand equity.  Negative brand equity acts as a tax that takes a bite out of all potential sales of the product.  What is the rate of this hidden tax on Vista?  How much extra does Microsoft have to spend in marketing to just to get to parity with a no-name product, and why is it willing to pay that tax?

Microsoft should be ashamed, not cheering, when it sees its agents playing games like “if we only had Microsoft’s money and resources but not its name, see what we could do!”

What’s more surprising is that this site was created by Bradley and Montgomery, which is an agency that seems to specialize in brand management (including tactics like “brand subterfuge”).  I asked Microsoft’s PR firm about their relationship with B&M and was told B&M was contracted to film a focus group due to “research we’d done indicating that a large number of negative perceptions were from people who had never seen Windows Vista, let alone used it.”  Fair enough, and I can see technically minded folks at Microsoft liking this as proof their technical prowess is not at fault.  But a company specializing in brand management turnarounds should know better than to post clips proving their client’s product suffers from negative brand equity.  Customers may not care, but those with a stake in the brand (investors, partners, resellers, retailers) may not be pleased with what this shows about the state of its stewardship.

I asked Microsoft’s PR firm about the drivers and message behind this initiative and was told:

Our goal with the Mojave Experiment was to have people who were making decisions about Windows Vista based on hearsay to realize that they should be judging the operating system for themselves. And that’s what the videos illustrate – that people’s perceptions can change once they see Windows Vista for themselves.

If this is just a small minority of potential customers, then fine, create targeted messages like this (although it’s tough to keep a message targeted on the Internet where everyone can see it).  If this is a growing minority though, serious cost/benefit analysis needs to be done to evaluate whether the “Windows” brand name is a vehicle or an anchor.

Ray Ozzie on His Personal Attention Management Techniques

April 23, 2008 at 7:54 am | Posted in Attention Management, interruption science, Microsoft | 1 Comment

Ever since I’ve had my radar up on attention management issues, I’ve noticed many interesting techniques that people use to manage their time and attention.  While I’m generally focused on how entire enterprises can address information overload (what I call Enterprise Attention Management), I’m always on the lookout for what individuals do to help manage their time as well (personal attention management).  For anyone looking for an executive level view of personal attention management, I’d recommend listening to the first few minutes of this Channel 9 interview with Ray Ozzie, Chief Software Architect at Microsoft

Ray was asked how he balances the need to span a vast spectrum of activities and the need to go deep as well.  He said (rough quotes here since I am not that skilled at transcription)

Attention management is biggest challenge of the role; the pace is fairly brutal.  At the beginning of the year I’ll plan out how many hours I want to spend in different categories: some for high level strategic things, time with product groups, and I realized you have to create whitespace because day-to-day interruptions cause you to thrash if you just deal with incoming issues.  You have to create time to think about what’s happening in the environment.

I create whitespace by going away – international travel, “think week”, and other ways.  The best way I’ve found to clear my mind is to go to a conference that’s off the beaten path or go somewhere with my wife that’s not technology related.

When I was coding I had a four hour rule that said don’t code unless you know you’ll have four hours of contiguous time because otherwise you’re just introducing more bugs.

It’s the life management equivalent.

Microsoft Offers to Buy Yahoo for $44.6B

February 1, 2008 at 10:57 am | Posted in Internet/Browsers, Microsoft, social software, Web 2.0 | 1 Comment

Computerworld reported today that Microsoft offered to buy Yahoo for $44.6B

Microsoft Corp. today offered to buy Yahoo Inc. for $44.6 billion in cash and stock to better compete with Google Inc. in the market for online services.

CEO Steve Ballmer made the offer in a letter to Yahoo’s board of directors yesterday, telling the board that he would release the letter this morning.

On a conference call this morning, Microsoft’s president of its Platforms & Services division Kevin Johnson called a combination of Microsoft and Yahoo a more “credible” alternative to Google in the online advertising and services market.

“By combining the assets of Microsoft and Yahoo, we can offer a more competitive choice for consumers, advertisers and publishers,” he said.

There have been rumors of this for quite some time:

  • 2005: ZDNet speculated about Yahoo and Microsoft teaming up to better compete with Google: “As it turns out, in true enemy-of-my-enemy-is-my-friend fashion, Yahoo and Microsoft have a mutual problem in Google. … Given that Yahoo and Microsoft were already chummy with each other on the multimedia front, why not merge their walled gardens to increase the utility of both in hopes of heading off any more defectors (end users) from taking in oodles and oodles of Google (at the expense of everyone else). ”
  • 2006: SearchEngineWatch blogged that “Yahoo & Microsoft Have Talked Partnering, Merging”
  • 2007: BusinessWeek reported “In the battle of online search, Microsoft is again courting Yahoo, according to media reports”

Of course, you could probably pick any two technology titans and find enough written about them to connect a thread.  But this seems more than random chance since there are obvious synergies, but one issue that makes me question the long term value.

Looking at it from a marketing point of view it’s a very good move.  Yahoo offers strength in web advertising, social computing, and web-based email where Microsoft is weak.  They have overlapping (and expensive) assets in search and categorization that can be consolidated and trimmed.  They also offer great talent and intangibles around web 2.0 and a disruptive, creative mindset.

From an infrastructure point of view I’m a bit more dubious.  Yahoo seems to favor the kind of Java, Unix, and open source tools (Apache, FreeBSD, Perl, PHP, Linux) you’d expect out of a young company out to challenge the powers that be.  If Yahoo has a huge number of very bright programmers that are almost religiously dedicated to Unix-based platforms and development they may not want to switch.  For scale reasons I’m sure Microsoft would allow this subset of the company to continue along that Unix path (I’m not saying they’d force mass conversion at the point of a sword), but it would take some restraint not to try injecting Windows servers and .NET into newer offerings and slowly alienate the staff. 

So, in summary, I think from a financial view it probably looks good (win/win for both sides), from a marketing view it looks good (fills in weaknesses of Microsoft and allows for consolidation of operations), but longer term the risk associated with the assimilation of Yahoo into Microsoft (and therefore the odds of capitalizing on the assets they are acquiring) may be even higher than normal for tech companies.

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