Saturday, February 2, 2008

Microsoft Won't Be Saying "Yahoo!" a Year From Now!

By now everyone has heard about the $44.6 billion takeover Microsoft is making of Yahoo!

But isn't this just the mere mating of two dinosaurs in the online advertising space?

According to Forbes, ( ) Microsoft's online business racked up $248 million in losses for the past quarter in December while Yahoo's income fell 23% from the prior year's Q4 to $268 million.

No doubt this is Microsoft's counter-punch to Google's left hook ... Google's web-based office application suite that has scored a direct hit on Microsoft Office's soft underbelly. Google also tagged Microsoft with a stiff uppercut by announcing this past Wednesday that its own earnings, largely from online advertising revenue, jumped 17% over the previous year to $1.21 billion! Any boxing fan knows that if you move in on an opponent too soon you're going to get tagged!

Perhaps one day Microsoft will be historically viewed as no more than a Mike Tyson ( ) of the software industry. "The baddest software company on the planet" who viciously knocked out early 19 or so opponents (Borland, Apple, Netscape, etc) before running into Buster Douglas (Google) who handed Iron Mike his first defeat. Any school yard bully is never the same after his first defeat.

And Microsoft will be no different. Yahoo plus MSN does not a Google make! Without a haymaker acquisition of a real quality search engine Microsoft will lose its fight with Google. Microsoft's acquisition of Yahoo is nothing more than a desperate weak jab thrown in the last round of a fight that has already been decided.

Bill Gates' biggest fear during his long and successful career was that the next Bill Gates would do to Microsoft what Bill had done to IBM. Make a huge fortune on something the incumbent giant overlooked. With IBM it was Gates not the incumbent giant who understood the value of an operating system.

$44.6 billion for Yahoo clearly shows that Microsoft doesn't quite understand the concept of "value" in the online advertising space.

Could it be that Bill Gates' upcoming retirement is his way of throwing in the towel early to avoid the eventual knockout he forsees coming Microsoft's way?

James Gingerich

Sr Partner Account Manager
Sybase iAnywhere