I was pleasantly surprised to see the Yahoo Board of Directors take the courageous step of standing up to Microsoft's unsolicited takeover bid. I was afraid that the financial advisers and bean counters would convince the board to take the money and run. So the introductory phase of the saga has ended and now the dance will begin in earnest.
I believe Microsoft will make one additional attempt to up their offering price, perhaps as high as $33 to $35 per share, but that is as high as they can afford to go. If Yahoo says "nyet" to that, expect Ballmer to take the gloves off and make a move to oust the current Yahoo board and replace it with one hand picked by Redmond.
Now that the bid has been made, Microsoft cannot allow itself to loose face by letting the takeover fail. They have admitted to the world that the MSN and Windows Live brands are failures and there is no other large player big enough to acquire to make up for that admission. Expect Microsoft to now employ their full arsenal of massive financial resources, effective lobbyists, and legions of attorneys on the Yahoo board. Gates and Ballmer never like to take no for an answer and in this case, they simply cannot afford to.
For better or worse, Microsoft crossed the Rubicon when they made their initial takeover bid. The die is cast and Redmond will not wait long before crying havoc and loosing the dogs of war.
Yahoo's only hope is for a stop gap alliance with Google, Amazon, or AOL to generate some positive income growth, even if it is only short term.
My prediction:
Microsoft eventually gets their way and a puppet board at Yahoo accepts an offer of $34.50 per share after a long protracted fight (around mid May). By this time, Google has poached a not insignificant fraction of Yahoo's best and brightest techies. The US DOJ approves the buyout in early autumn before a new administration not as friendly to Redmond can take office. But the EU antitrust regulators say no to the deal, setting the stage for a nasty international trade squabble that will make the current row over the recent EU fines seem like a pleasant picnic in the park.
The NFL just had their SuperBowl (how 'bout those Manning boys!), now the GeekBowl has begun. The strategies are subtle and the boardroom language is polite, but the hits are just as brutal, the play just as devious and dirty and the consequences of failure are measured in billions.
Monday, February 11, 2008
Tuesday, February 5, 2008
Super Tuesday
It is Super Tuesday in states all around the country, including here in Alabama. I voted shortly after the polls opened at 7:00 am. There was already a long lined forming outside the door. Turnout looked very high, at least early. It was encouraging to see so many people out taking part in the process. I felt optimistic and full of charity, not my usual cranky and argumentative political self. I probably could have even said something nice to someone who said that they were voting for Hillary. Just seeing the process at work made me feel like there was still hope for America. Now if only we could get either party to give us some candidates worth voting for.
Who did I vote for? Well, even though I know he has no chance of winning and I really disagree with his call to totally disengage our military from all of its overseas commitments, I had no choice but to vote for Ron Paul. I guess my libertarian economic leanings and desire for a literal reading of the constitution overcame my normal pragmatic conservatism. Actually, it was really more of a protest vote.
Message to the RNC and DNC: Start offering up some real candidates next time, not the total slate of bozos we have to pick from this time around (my apologies to Bozo the clown for comparing him to the current crop of politicians).
Who did I vote for? Well, even though I know he has no chance of winning and I really disagree with his call to totally disengage our military from all of its overseas commitments, I had no choice but to vote for Ron Paul. I guess my libertarian economic leanings and desire for a literal reading of the constitution overcame my normal pragmatic conservatism. Actually, it was really more of a protest vote.
Message to the RNC and DNC: Start offering up some real candidates next time, not the total slate of bozos we have to pick from this time around (my apologies to Bozo the clown for comparing him to the current crop of politicians).
Friday, February 1, 2008
Microsoft goes Shopping (Big Time)
So Microsoft has been window shopping for a long time now for a serious web presence and today they finally whipped out their hefty checkbook and announced what they wanted to buy: Yahoo. This announcement is quite simply earth shattering to anyone who has followed tech for any amount of time. Microsoft's largest previous purchase was a mere $6 Billion dollars for AQuantive Inc. last August. Now they have made an offer that dwarfs that one by more than seven times over. The offer as it stands now is $31 per share for a total of $44.6 Billion dollars. Many commentators think that Microsoft will eventually have to shell out substantially more than this to close the sale. This seems all the more likely after the way Yahoo's share price skyrocketed today.
This is a simply staggering sum. It represents a large portion of Microsoft's cash reserves and can only be viewed as a "bet the farm" move. What has made the world's largest software firm take this kind of gamble and what does it mean for the industry as a whole? The reason for the move is, of course, Google, the first company in more than two decades to pose a credible and lasting threat to Redmond.
So what should one make of this offer? Here are the implications as I see them:
1) Whatever else you think of the offer, it's one indisputable message is that Microsoft is admitting failure in all of its previous efforts to compete with Google on the web. Google has cleaned Microsoft's clock in terms of search share and internet ad revenue. Everything that Microsoft has tried so far has failed miserably to close the gap with Google. If anything, Google has continued to widen their lead.
2) As an admission of failure, this announcement must be crushingly demoralizing to all of the Microsoft employees in the MSN and Windows Live divisions. Steve Ballmer this morning basically told them that their efforts were inadequate and that Microsoft was going out to hire new talent who can get the job done.
3) As a result, if this offer fails to be accepted or is blocked by antitrust regulators, the MSN and Windows Live brands are damaged beyond repair. If Microsoft Management has written off these product lines, how can the rest of the market ever take them seriously again?
4) If the offer is accepted, but Microsoft still continues to loose ground to Google, where else does Microsoft have to go? They will be around $50 Billion dollars poorer and there will be no additional large players left to purchase. Google will have won the battle for the internet and cloud computing and Microsoft's slide into marginal relevance will accelerate. The desktop becomes merely a gateway to Google's world and any desktop, Windows, Linux or Apple will do just fine. Windows and Office will no longer be able to command the hefty price tags that they sport today and the Operating System and the Productivity Suite truly become a commodity the way hardware is today.
5) How in the world does Microsoft integrate the largely open source based Yahoo data center and infrastructure into the Microsoft Windows realm? Microsoft is famous in the industry for eating no other dog food than their own. Remember the embarrassment and stink that Microsoft faced when people realized that hotmail was initially running on Open Source software? Remember how Microsoft would not rest until they had migrated hotmail over to a Windows platform? Well that episode will pale in comparison to what Microsoft will have to endure to assimilate the Yahoo ecosystem. A wholesale "rip and replace" of the Yahoo server farms with Windows Server, SQL Server, IIS and Exchange will take incredible amounts of planning, manpower, capital and, most importantly, time. The $50 Billion price tag now starts to look more like $60 Billion. Wall Street has very limited patience when this kind of money changes hands. Investors will expect quick results and will not be willing to give the new Yahoo acquisition strategy much time, certainly not the 18 months to two years a rip and replace effort would take. But Microsoft's entire corporate DNA would reject the transplanted Open Source software sitting in the Yahoo data center during the interim. They will have no choice but to suffer the (to them) unthinkable humiliation of the new corporate flagship product running on the very open source software that they have previously called communistic and "a cancer." If they rush the rip and replace, they risk breaking the very expensive new toy they just bought and making the whole exercise for naught.
7) My experience with previous data centers I have worked in is that computer geeks who have spent sufficient time working with Open Source software develop a real aversion to any attempt to force Microsoft products on them. Really good Open Source programmers, systems administrators and DBAs will often walk out the door to another position before they willingly sit down in front of a MMC GUI screen on a Windows 2003 server. I expect that many of the deep Linux, Apache, and MySQL geeks at Yahoo will take the same walk before welcoming their new Redmond Overlords. Silicon Valley will be flooded with a tide of passionate and talented geeks looking for new challenges. Google, Sun, Red Hat and Oracle will welcome these pilgrims with open arms and open wallets. The recently purchased Yahoo will be left destitute of their best and brightest minds, which is really the only resource you would want to buy a tech company for in the first place.
So in short, what is the real story here? I see it summed up in one word, DESPERATION. Microsoft basically just put most of their chips on the roulette table and told the man to spin the wheel. If they succeed, the buy another five to seven years as kings of tech. If they fail, the cede the field of battle to their new masters at Google. We are in for a very interesting ride. Buckle up and stay tuned...
This is a simply staggering sum. It represents a large portion of Microsoft's cash reserves and can only be viewed as a "bet the farm" move. What has made the world's largest software firm take this kind of gamble and what does it mean for the industry as a whole? The reason for the move is, of course, Google, the first company in more than two decades to pose a credible and lasting threat to Redmond.
So what should one make of this offer? Here are the implications as I see them:
1) Whatever else you think of the offer, it's one indisputable message is that Microsoft is admitting failure in all of its previous efforts to compete with Google on the web. Google has cleaned Microsoft's clock in terms of search share and internet ad revenue. Everything that Microsoft has tried so far has failed miserably to close the gap with Google. If anything, Google has continued to widen their lead.
2) As an admission of failure, this announcement must be crushingly demoralizing to all of the Microsoft employees in the MSN and Windows Live divisions. Steve Ballmer this morning basically told them that their efforts were inadequate and that Microsoft was going out to hire new talent who can get the job done.
3) As a result, if this offer fails to be accepted or is blocked by antitrust regulators, the MSN and Windows Live brands are damaged beyond repair. If Microsoft Management has written off these product lines, how can the rest of the market ever take them seriously again?
4) If the offer is accepted, but Microsoft still continues to loose ground to Google, where else does Microsoft have to go? They will be around $50 Billion dollars poorer and there will be no additional large players left to purchase. Google will have won the battle for the internet and cloud computing and Microsoft's slide into marginal relevance will accelerate. The desktop becomes merely a gateway to Google's world and any desktop, Windows, Linux or Apple will do just fine. Windows and Office will no longer be able to command the hefty price tags that they sport today and the Operating System and the Productivity Suite truly become a commodity the way hardware is today.
5) How in the world does Microsoft integrate the largely open source based Yahoo data center and infrastructure into the Microsoft Windows realm? Microsoft is famous in the industry for eating no other dog food than their own. Remember the embarrassment and stink that Microsoft faced when people realized that hotmail was initially running on Open Source software? Remember how Microsoft would not rest until they had migrated hotmail over to a Windows platform? Well that episode will pale in comparison to what Microsoft will have to endure to assimilate the Yahoo ecosystem. A wholesale "rip and replace" of the Yahoo server farms with Windows Server, SQL Server, IIS and Exchange will take incredible amounts of planning, manpower, capital and, most importantly, time. The $50 Billion price tag now starts to look more like $60 Billion. Wall Street has very limited patience when this kind of money changes hands. Investors will expect quick results and will not be willing to give the new Yahoo acquisition strategy much time, certainly not the 18 months to two years a rip and replace effort would take. But Microsoft's entire corporate DNA would reject the transplanted Open Source software sitting in the Yahoo data center during the interim. They will have no choice but to suffer the (to them) unthinkable humiliation of the new corporate flagship product running on the very open source software that they have previously called communistic and "a cancer." If they rush the rip and replace, they risk breaking the very expensive new toy they just bought and making the whole exercise for naught.
7) My experience with previous data centers I have worked in is that computer geeks who have spent sufficient time working with Open Source software develop a real aversion to any attempt to force Microsoft products on them. Really good Open Source programmers, systems administrators and DBAs will often walk out the door to another position before they willingly sit down in front of a MMC GUI screen on a Windows 2003 server. I expect that many of the deep Linux, Apache, and MySQL geeks at Yahoo will take the same walk before welcoming their new Redmond Overlords. Silicon Valley will be flooded with a tide of passionate and talented geeks looking for new challenges. Google, Sun, Red Hat and Oracle will welcome these pilgrims with open arms and open wallets. The recently purchased Yahoo will be left destitute of their best and brightest minds, which is really the only resource you would want to buy a tech company for in the first place.
So in short, what is the real story here? I see it summed up in one word, DESPERATION. Microsoft basically just put most of their chips on the roulette table and told the man to spin the wheel. If they succeed, the buy another five to seven years as kings of tech. If they fail, the cede the field of battle to their new masters at Google. We are in for a very interesting ride. Buckle up and stay tuned...
The Beginning
Here at last, after thinking about it for quite a while, is the beginning of my first Blog. Carlos Hawes Geek Think. Here is where I plan to post thoughts on three main topics: Technology, Christianity and Politics, or as I call them, "Three Things That Never Fail to Get People Angry." I'll also through in occasional musings on the arts (especially music and film), the outdoors and parenthood.
I have loved writing for as long as I can remember, and have seldom been without strong opinions on a ton of topics. Thankfully, the web and blog technology in particular give me the opportunity to share some of these opinions with you, dear readers (hopefully there will be a few).
So lets kick things off with the big technology store of the day (actually of the year so far), Microsoft's offer to buy Yahoo. So on to the next post and my take on this staggering announcement and what I think it means.
I have loved writing for as long as I can remember, and have seldom been without strong opinions on a ton of topics. Thankfully, the web and blog technology in particular give me the opportunity to share some of these opinions with you, dear readers (hopefully there will be a few).
So lets kick things off with the big technology store of the day (actually of the year so far), Microsoft's offer to buy Yahoo. So on to the next post and my take on this staggering announcement and what I think it means.
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