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Yahoo Deal Is Big, but Is It the Next Big Thing?
mattsgotredhair brings us a NYTimes article discussing how Microsoft's bid for Yahoo contrasts against one of the core philosophies of Silicon Valley: looking forward. From the Times:
"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. 'This is the very nature of the Valley,' said Jim Breyer of the venture capital firm Accel Partners. 'After very strong growth, businesses by definition start to slow as competition increases and young creative start-ups begin to attack the incumbents.'"
It worked when Microsoft bought DOS, it worked when Microsoft bought Hotmail, it's current biggest web service. Microsoft does try to innovate, but most often that stuff just falls flat on its face, when Microsoft buys other people's products though, that's when they hit a winner. Saying that the most wealthy, successful software company in the world is doomed to failure for going against silicon valley reasoning is futile when that's what they've always done and made more than anyone else while doing.
When Argumentum ad Hominem falls short, try Argumentum ad Matrem
You can't compare the HP/Compaq merger to a Microsoft/Yahoo! merger. First of all, infrastructure plays a much greater role in the Microsoft/Yahoo! scenario. Yahoo! is heavily run on open source software, including PHP, FreeBSD and Linux. It won't look good for Microsoft if so much more infrastructure is running on software they have belittled for years now.
So either they'll have to do like they did with Hotmail, and let it run on FreeBSD until they've basically re-written in from scratch to use their technology. Of course, that will be very costly, and likely nowhere near as good as the original (like we've seen with Hotmail). They'll be in the same position they are now, except having spent far more money.
The HP/Compaq merger was far more about combining product lines, management teams, R&D, support teams, etc. That is, it was more about an organizational merger, rather than a technological acquisition.
Cisco is Silicon Valley's poster child for acquired innovation -- acquiring over 100 companies in the last 10 years (see http://en.wikipedia.org/wiki/Cisco_Systems_acquisitions). Letting someone else's VCs pay for your R&D is a great way to always have the best of the best technology. And don't most of the Valley's VCs and "brain-power" cater to this growth-by-acquisition model. Isn't the exit strategy of a VC or serial entrepreneur defined by getting a Cisco, Google, or Microsoft to by the company?
Two wrongs don't make a right, but three lefts do.
- Invest in 10 startups while they are cheap.
- Push them grow as fast as possible.
- One in ten of the startups make it, and the rest implode from capital and personnel bloat.
- Cash out of the one successful startup for 20x the initial investment.
- Go back to step 1.
Certainly, this is a money-making strategy for the VC. It's not necessarily good for the 9 failed businesses, some of whom might have been profitable if they had taken a more conservative growth approach. (And some would have failed no matter what, with or without VC juicing.)Lots of users. Lots of places to hang signs and ads. Lots of groups. Lots of apps. Lots of little businesses.
Yahoo is a country with lots of geography. That's what Microsoft is buying.
It's not a new widget. It's not Web 2.0. It's not some sort of way-kewl social site with a new innovative bent.
It's the real estate. One more time: Microsoft is buying web real estate, not bottom feeding, not buying rotten tech.
---- Teach Peace. It's Cheaper Than War.
Well it really was not an offer. As I read it, it was a statement of intent. That is, most likely they plan to acquire shares from holders that are willing to sell directly to MS at a premium. Once a sufficient percentage is obtained they move to take over the company by a proxy vote. Control is final after a positive review by the DOJ and the EU.
This is a hostile take over where the purchaser could care less what either the board and the management thinks or responds.
I really doubt that MS will disappear due to this or other missteps, but that does not mean the probabilities are nil to none.
From what I can remember the aquisitions though have always been for technology they don't already own or do own but inferior. If it goes through they get Yahoo market share, but if they tinker with Yahoo too much most likely people will leave Yahoo since if they wanted to use Microsoft Search they would do. Market share is all well and good, but even with their combined market share they would still be a long way behind Google and Yahoo has nothing that I can see that could be classed as a "Killer App". If the sale does go ahead what is going to happen? Are they going to call it Microsoft Yahoo and have the run side by side with their current offerings? Also Yahoo is also a failing company with no direction, they even brought back an original founder to get things moving again but it has n't made any difference. Personally it does n't make any sense to me, but maybe I will be proved wrong time will tell.
But Microsoft usually buys really small companies with good products where they can use their marketing skills to build up market share. Yahoo is a bit different to their usual takeover target.
Take one company that isn't being successful at competing with Google.
Add to that, one more company that isn't successful at competing with Google.
What you end up with is one much larger company that isn't able to compete with Google.
I find it truly inconceivable that someone thinks this is a good idea for either company. If Yahoo were truly on the bleeding edge I could actually buy this proposal but Yahoo has been in catch up mode itself. The only thing I believe that this does for MS is provide a much larger market share for Google to take from them.
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Hell, you're being kind to them. Silicon Valley's preferred method is to fork it right around step 2 and go to a step 2.5 - hype the shit out of the company and hold an IPO before the company collapses, pushing losses onto hapless investors who thought they could get rich quick.
"More companies die of indigestion than starvation."
("The HP Way," Hewlett-Packard co-founder David Packard, page 142)
"You have liberated me from thought."
3 things about computers: they're alive, they're self-aware, and they hate your guts.