Fresh thoughts on the Microsoft/Yahoo merger

This is exactly the kind of topic I avoid here, but since the deal hasn’t been shot dead (at least not yet) as I’d expected, it’s time to throw an opinion on the pile.

The first thing that comes to mind is the 1995 attempt by Microsoft to buy Intuit. It doesn’t seem important now but at the time it was a huge deal: it would have been the largest software acquisition in history. Inside Microsoft, where I worked at the time, the move was a surprise, much like the Yahoo deal probably was (Hot/Big companies are news leaks, so execs rarely bother with early internal memos). The DOJ said no, but regardless it represented the same type of inspired, ballsy, ‘go all in’ strategy that people forget Microsoft is known for (See Microsoft reverses course or Internet Tidal Wave Memo).

Forget whether it will work or not, this Yahoo move communicates how competitive and aggressive Microsoft still is. If Google kicks Microsoft’s ass all over the next decade, it will be a bloody war all the way. Unlike IBM, Microsoft is not going to walk quietly to the sidelines of public attention; they’re going to go out swinging. So say what you will about the strategy, but in terms of moving to take control over the battleground, Microsoft has scored a victory: they’re in the headlines, for the first time in ages, for being on the prowl, while news of Google has fallen beneath the fold. With the paint still wet on their recent acquisition of DoubleClick, it’s hard for Google to complain loudly right now.

Ok, here’s the cynicism. All mergers suck. They really do. They rarely go well and when they do it’s only after 12-16 months of hand wringing and confusion among everyone involved on both sides (not to mention the costs of defections on principle). No sane person would ever choose to merge with another company that has overlapping product lines. It’s a move that is only conceivable from the landscape view provided by executive ivory towers. VPs can say all they want about not losing jobs, but everyone knows no VP would ever say “Yes. This merger means you will be fired 3 weeks from now! Run for the hills!” It just doesn’t go that way, ever. Being employed isn’t much of a prize anyway if the job that remains barely resembles the one you loved. Of course if you hate your job, or your project, then this could be opportunity time.

But on the whole I suspect the entire Windows Live division held in a collective cry of despair the day the merger was announced, in the same way the Microsoft Money team did in 1995. It’s hard to recover from that feeling of betrayal that comes from working hard for months, loyally following your leader’s commands, only to learn, as an aside, over coffee, that someone 5 levels above you had been scheming to buy a competitor, one of the targets on your well worn dartboard, all along. In the old Microsoft days it was the stock options that carried you through. The hallway talk was “We do what’s right for the company first” but I don’t know if that line is still heard, much less believed, anymore. In some ways merger talk is a reality test: is what I’ve made better than what we’re buying? And will the newly appointed mystery date VP agree? That kind of uncertainty can’t help but tank morale.

And now, optimism. As an orchestrator, an architect, a creator, this would be one of the greatest shopping sprees for intellectual property of the last 20 years. It will be a once in a lifetime treat to be the VP who gets to pick and choose among projects and people from two vast pools of ideas grown from very different gardens. Hand that task over to a Ray Ozzie, Chris Jones or Joe Belfiore, and, if you get everyone else sufficiently far out of their way, wondrous things are possible. I’d bet any of them, or perhaps a management star from Yahoo’s ranks, could inspire the best people from both companies to stick around, at least long enough to watch the first offspring rise above the merger mess, or, perhaps, go up in flames.

One Response to “Fresh thoughts on the Microsoft/Yahoo merger”

  1. Scott

    A few people have commented to me in e-mail with an alternative, or perhaps more insightful, view. Mainly that this deal is about one single number: market share. Microsoft desperately needs advertising & search market share and this is the only way to buy it. The rest is noise.


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