Facing Free Software, Microsoft Looks to Yahoo
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Internet-centered programs that compete with Microsoftâs core products are an overlooked driver of its bid for Yahoo.
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While dealing logistically and technically with their overlapping online offerings will certainly prove troublesome&#160;if its bid to purchase Yahoo&#160;succeeds, Microsoft will at least have an immediate outlet for bringing more of its traditional desktop portfolio to the Web and to a broader customer base.Microsoft has been trying for more than two years to find a critical mass to adopt new online services beyond search, e-mail, and instant messaging under the Windows Live brand -- with little success. Its early MSN e-mail and IM offerings are popular enough with Web users; however, users of Google and Yahoo online services have been loath to adopt the revamped Windows Live offerings in favor of the ones they&#39;re already using.Not only could that change if the company purchases Yahoo, but Microsoft also will have a ready-made Web front end for rolling out more of its desktop applications as services, said Paul Fox, CIO of Guy Carpenter, a New York-based reinsurance company.&quot;The Yahoo platform is really what they&#39;re buying,&quot; he said. &quot;With Yahoo, they&#39;re tapping into the base culture of the Internet online community that&#39;s matured over the last 10 years. It&#39;s going to make it easier for people to take a look at and try their services, whereas before it had to be a more conscious effort.&quot;Aside from the usual raft of consumer applications&#160;such as&#160;search, e-mail, maps, and the like, Microsoft already has brought some of its many business desktop applications -- such as Office and CRM -- online in hosted, though often scaled-down, versions.Access to Yahoo&#39;s estimated 500 million visitors per month will give it a new channel to deliver what the company now calls its &quot;software plus services&quot; strategy, as well as buy the company time to bring more competitive versions of applications that were originally coded for the desktop to the Web.Indeed, in the conference call discussing the Yahoo bid Friday, Microsoft CEO Steve Ballmer made a pointed reference to efforts to shed its desktop legacy and move even aspects of its Windows OS to the Web, a trend the company started with some features in the latest version, Windows Vista.&quot;The Windows user wants to be live, the Windows experience needs to increasingly embrace the Internet,&quot; he said. &quot;There will be a Windows Live, there will be an Office Live as we continue to bring out innovations in which Office transforms and is transformed by the Internet.&quot;Ballmer also likely had the rising popularity of Web-hosted productivity software, such as Google Apps, Zoho, and&#160;Yahoo&#39;s Zimbra, in mind when considering how to Web-enable Microsoft&#39;s desktop software. So far, Microsoft&#39;s Office Live has been more of a way for small businesses to get up and running with a Web site and basic hosted business applications&#160;such as&#160;accounting and CRM; however, bringing a full productivity suite to the Web has been Microsoft&#39;s plan for some time.Microsoft also can leverage its own strength among business customers to bundle and technically link applications so that customers buy an all-in-one package rather than individual products. For instance, Microsoft has created tight links between a new unified communications product, Office Communications Server, and its Office and SharePoint collaboration software so that customers must buy them all together to create comprehensive infrastructure. Microsoft can make similar attachments between online versions of its applications -- or just bundle them together in creative ways -- and market them to a broader audience.&quot;If Microsoft does something well, it&#39;s bundling products and services,&quot; said Ned May, director and lead analyst of marketing research firm Outsell. He joked that if Microsoft purchases Yahoo, there might come a day when you start up Windows and &quot;up pops Yahoo, and it takes you three days to remove that functionality.&quot;&quot;Yahoo provides a platform in many regards -- an audience of 500 million people to which you can bundle products and new offerings,&quot; May said.Doing quick math, May figured that at &quot;500 million a month for about $44 billion,&quot; it will cost Microsoft about $86 a head for acquiring each member of its new audience of Web users. &quot;Not a bad deal,&quot; he said.
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Announcements by Yahoo and Google show that Microsoft faces challenges to its business software franchises.
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InfoWorld - While observers believe that Microsoft is willing to pay Yahoo $44 billion primarily for its users and advertising base, Microsoft's chief software architect, Ray Ozzie, wants to grow its developer community as well.
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What Yahoo! can do for Microsoft--and what it can't.
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Yahoo! and Microsoft need each other -- to populate the world with Googlephobes.
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By rejecting Microsoftâs initial foray back in February 2007, Yahooâs denial of Microsoftâs interest may have only whet Microsoftâs appetite.
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Microsoft bid may be catalyst for needed change at Yahoo, but Yang and company are expected to fight it, insiders say.
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Yahoo Inc. said on Thursday it will begin testing a free desktop search service in early January, following rivals hoping to extend the reach of wildly profitable search-related advertising.
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Web portal signs extension to provide paid searches to Microsoft as it builds its own service. NEW YORK  - Yahoo! Inc. said Thursday it agreed to provide paid search services to Microsoft Corp.
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Yahoo is eager to improve its Web-based Yahoo Mail, which competes most directly with market-leader Hotmail from Microsoft. Though many of the users of those services do not pay for them, the
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Business software units of Yahoo  Inc and Google Inc are introducing beefed-up versions of their  Web-based software that compete with Microsoft Outlook,  offering yet another clue why Microsoft Corp made a $45 billion  unsolicited bid for Yahoo.
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Most of Yahoo Inc's  top  institutional shareholders may be more interested in making  sure Microsoft Corp  does not overpay for the Web  pioneer, because they have more money invested in the bigger  software maker, a research report said on Friday.
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Microsoft executives said very little on Friday about the undeniable challenges of integrating the company&#39;s Internet division with Yahoo, largely avoiding the proverbial elephant in the room that could delay or, in some cases, eliminate benefits of the deal.At the heart of the acquisition is Microsoft&#39;s goal of giving its online advertising and online services business a major boost, ending years of business and technology defeats at the hands of common rival Google.Microsoft wants to make sure that as online ad spending doubles to about $80 billion in the next three years, it will be in a much better position to grab a larger piece of the market, specifically in sponsored search, which is the biggest online ad segment and where Google dominates.As CEO Steve Ballmer, President of Platforms &amp; Services Division Kevin Johnson and Chief Software Architect Ray Ozzie said repeatedly during Friday&#39;s news conference, Microsoft wants to swallow Yahoo to accelerate its pace in online advertising. With Yahoo&#39;s online services, engineers, and ad platforms, Microsoft hopes to become a stronger competitor to Google than it is today.That all sounds fine in theory, but Ballmer and his colleagues said little about the energy and know-how they will need to make this proposed $44.6 billion acquisition work, considering that the companies have a significant overlap in online services, markedly different cultures, and an abundance of inflated professional egos at every level.Not to mention that Yahoo these days is far from functioning as a well-oiled machine. Yahoo has been in significant turmoil for more than a year. Seasoned executives who are experts on its business have struggled and largely failed to restore the company&#39;s technical edge and business focus. That&#39;s a mess that Microsoft will inherit and will have to solve in order for the deal to work its expected magic.In short, Microsoft must make sure that, in its quest for scale and speed, it doesn&#39;t end up getting stuck, its wheels spinning, trying to mesh Yahoo with MSN, while Google speeds further ahead. It&#39;s clear that to take advantage of the online ad growth, companies will need to innovate and change quickly, and not be sidetracked by acquisition distractions.Among the many emerging opportunities in online advertising are: the mobile sector, which is expected to go from almost nonexistent to vibrant in the coming years; social Web properties, such as social networks, blogs and social news sites, which haven&#39;t been monetized properly and hold great promise; and video, both in the form of video ads and ads in videos.There were indications during Friday&#39;s news conference that Microsoft may not have taken the time to fully assess the magnitude of the integration complications. Despite Ballmer&#39;s assurances that he personally has thought &quot;long and hard&quot; about the Yahoo acquisition, there is evidently a level of urgency about the move, or else the deal wouldn&#39;t have been an unsolicited offer, as Yahoo has portrayed it.If, as Ballmer indicated, the companies have been in on-and-off talks for about 18 months about a possible acquisition, it&#39;s fair to ask -- as a financial analyst did -- why they couldn&#39;t sit down privately and present, jointly, a more cooked deal. Basically, Ballmer admitted that Google keeps expanding its empire and time is of the essence.&quot;Any large integration process has risks associated with it. We&#39;ve all thought about it. We could have hired [more] engineers, but at the same time the market continues to grow and the leader continues to consolidate positions and there&#39;s nothing quite like putting together two larger sophisticated R&amp;D organizations,&quot; Ballmer said.Along with the inherent opportunity to sell more ads, Nick Patience, managing analyst at The 451 Group, also sees a &quot;potential integration headache&quot; with having to integrate Microsoft&#39;s ad platforms -- AdCenter and aQuantive -- with Yahoo&#39;s. Patience is also skeptical about the possibility of merging search indexes, and believes that the search engines will most likely have to continue to operate independently. Overall, the integration work would represent for Microsoft &quot;a step into the unknown,&quot; particularly since this would be by far the largest acquisition in Microsoft&#39;s history, Patience said.Gartner analyst Allen Weiner also sees potential integration challenges, particularly because he doesn&#39;t think either organization has a powerful leader who can take the reins of the combined entity and lead it into the future. &quot;They need someone like a Steve Jobs or a Bill Gates who has the charisma, vision, technical knowledge, and consumer knowledge to lead,&quot; Weiner said.On paper the acquisition has interesting potential, but it will all come down to how the integration is carried out, Weiner said. &quot;It&#39;s all about the execution,&quot; he said. &quot;The devil is in the details.&quot;Despite numerous acquisitions over the past few years in advertising and Web 2.0 technologies, Yahoo has struggled to jump-start its business, said JupiterResearch analyst Michael Gartenberg. &quot;At the end of the day, it hasn&#39;t all worked out for them,&quot; he said.While Microsoft executives are stressing that a deal with Yahoo would give it the scale to compete with Google, wrapping the two companies&#39; diverse technologies together won&#39;t be simple, Gartenberg said. &quot;In order to get to that scale, you&#39;ve got to be able to fit all those pieces and parts together,&quot; he said.Despite the integration concerns, Microsoft has good processes in place for managing acquisitions of large companies, said Gartner analyst Mike McGuire. However, it will be key for Microsoft to quickly put a senior management team in place as Google will continue to propel ahead as Microsoft sorts out the details. &quot;They are going to have to start showing some traction, or at least a really solid vision for how they will combine the companies ... early on,&quot; McGuire said.Matt Booth, a Kelsey Group analyst, thinks that the integration challenges will be major but predicts that Microsoft will work through them methodically, starting on the back end and linking services in a way that, as much as possible, is transparent to end-users, be they advertisers, publishers, or consumers. For services that are just too difficult to integrate, they will likely be kept separate. The last thing Microsoft wants to do is drive users away, Booth said.In a research note, Citigroup financial analyst Mark Mahaney said he is skeptical that a combined Microsoft-Yahoo would improve its search products enough to affect Google&#39;s position, since they both have been losing search market share and, in his opinion, seeing a decrease in their search innovation.&quot;Given what would surely be immense integration challenges, it&#8217;s hard for us to see how a Microsoft-Yahoo combination would create a greater technology competitor to Google at least for the foreseeable future,&quot; he wrote.&quot;We could see a scenario by which Google would actually gain more market share due to industry uncertainty over the integration of the deal,&quot; Mahaney added.
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Microsoft Corp. MSFT.O said on   Thursday it may offer a free, advertising-supported version of   its basic word processing and spreadsheet software, in an   apparent bid to fend off a nascent challenge from Google Inc.   GOOG.O in the business software market.
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Jerry Yang gives a glimpse of Yahooâs future that depends more on third-party developers.
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The competition between two leading Internet search engines is heating up anew as Yahoo Inc. plans to announce today that it soon will offer a free, high-speed way to search for information