This week Cringely offers up a speculative piece asserting that
Microsoft might not really care if its bid to buy Yahoo succeeds or not
— Bill Gates just wants to disrupt Yahoo and poach the company’s employees.
‘Microsoft’s offer for Yahoo has thrown that company and several others
into a tizzy. Yahoo can’t be getting much work done, that’s for sure
… Redmond’s real goal may be simply to poach people from Yahoo, and
this deal could help them do just that.’
Last week I presented my best guess why Microsoft would want to buy
Yahoo. What was it that made Yahoo worth $44.6 billion to Bill Gates?
Based on what I believe is a pretty profound understanding of the
innards of each company, I said it came down less to competing with
Google and more to transforming Microsoft into a new company operating
under new rules and successful in a new era. Anything else simply
didn’t make sense to me. Ganging up on Google might sound good, but
combining corporate cultures is difficult and in the short term —
which is all that matters to most companies today, seeing their
trajectories simply as a succession of short terms — it could only
help Google and hurt Microsoft/Yahoo. If Microsoft was serious about
its bid for Yahoo, then there had to be some bigger prize for Redmond
that went beyond simple market share.
But what if Microsoft wasn’t serious about its offer? Well then things start to get REALLY interesting.
Certainly Microsoft’s offer for Yahoo has thrown that company and
several others into a tizzy. Yahoo can’t be getting much work done,
that’s for sure. And if you believe the press reports, AOL and News
Corp have been dragged into the strategizing, too, and are subject to
disruption. For Yahoo, as the primary target, overall efficiency in the
company will have dropped instantly by 20 percent just because people
will be talking at the watercooler rather than doing their work. And
Yahoo wasn’t a very efficient place to begin with. This alone has some
value for Microsoft, where I will guarantee you the distraction is far
Screwing with the minds of Yahoo has value to Microsoft and screwing with AOL and News Corp, too, well that’s just a bonus.
You can see that Yahoo is concerned about Microsoft’s real
intentions in its response to the Microsoft bid. The Yahoo board said
the bid undervalued the company, but Yahoo spokesmen (not the board)
carefully added that regulators might block the deal and Microsoft was
offering no financial guarantees.
If Microsoft were to come back to Yahoo with a sweetened bid nearer
to $50 billion and a guaranteed $1 billion termination fee if for any
reason the deal should be blocked or fall through, I’m guessing Yahoo
would respond much more favorably.
It’s up to Microsoft now to prove its intentions.
There is good reason to believe, however, that Microsoft’s
intentions are anything but good. Redmond’s real goal may be simply to
poach people from Yahoo, and this deal could help them do just that.
There is plenty of historical precedent for such behavior. Back in
the 1990s, for example, Microsoft made many approaches to Borland, a
company that was giving it fits in the programming languages business
at the time. Borland’s products were simply better (and a lot cheaper)
than Microsoft’s. Bill Gates had also been stung by the defection of an
important Microsoft executive, Rob Dickerson, to Borland. Failing to
buy Borland at a good price, Microsoft took to recruiting Borland
employees, sending limousines during lunch hour with Microsoft signs in
their windows to Borland’s Scotts Valley, California headquarters to
pick up techies for job interviews.
Microsoft reportedly took this technique to an even higher level
around the same time when it tried to buy Intuit, which at that point
was primarily known for its Quicken home finance application. Microsoft
wooed Intuit and won the company in 1994 with a $1.5 billion all-stock
offer. Another reported incentive to Intuit was Microsoft’s threat to
throw $1 billion into development of competing products if Intuit
didn’t sell out.
Already in antitrust trouble with the Department of Justice,
Microsoft eventually dropped the offer, paying Intuit a $46.25 million
termination fee. But according to at least one Intuit techie who jumped
to Microsoft shortly thereafter, the primary purpose of Microsoft’s bid
was actually to get information on Intuit’s programmers, NOT to buy the
Unlike Borland, where Microsoft paid a PR penalty (and later scored
a lawsuit) for sending limos to the parking lot and interviewing
anybody who would get in, by entering a formal due diligence period
with Intuit, Microsoft got access to many details, including Intuit’s
product plans and employee records. By the time they bailed on the
deal, Microsoft had a very good idea exactly which Intuit employees to
recruit to both improve Microsoft Money and to hurt Quicken,
QuickBooks, and TurboTax.
It is a testament to Intuit that the company survived.
Now jump to Yahoo, where exactly the same process could be in
effect. At a minimum Microsoft is forcing competitors to act when they
would rather not. If Yahoo succumbs Microsoft will gain exactly the
sort of inside information they got from Intuit. Yahoo is a huge
company plagued with pockets of inefficiency (pockets of efficiency?).
A failed Microsoft bid, even one involving a termination fee, could
lead to horrific results for the company. Remember that Yahoo is
staggering here while Intuit was at the top of its market and its game.
I’m not saying this is what’s happening, by the way, just that it concerns me. I guess we’ll have to wait and see.
And while we are waiting, most of the technology world has been
hanging out this week in Barcelona, learning about the future of mobile
technology at the 2008 Mobile World Congress, which sounds like a
government agency but is really just a trade show for cellphones.
Google is there announcing a new version of its Android open source
software developers kit for building Linux-based mobile phones that
will work well in the Google ecosystem. But unless it is happening
behind closed doors and I am unaware of it, nobody in Barcelona is
looking at a true Google Phone or gPhone, which won’t hit the market
until later this year.
The whole concept of the gPhone is problematical both for the market
and for Google, itself. I’m making a distinction here between Android
phones introduced by any number of vendors and a true GOOGLE phone — a
gPhone — actually sold under its own brand by Google.
Microsoft doesn’t sell PCs, you may notice, because to do so would
step on the toes of their hardware OEMs. Okay, the xBox 360 is a lot
like a PC, but it is still a lot more like a video game and Microsoft
was around for 25 years before it dared sell an xBox. So conventional
wisdom says Google won’t sell a gPhone, preferring instead to see the
world repopulated with Android phones, instead.
But Google is not like other companies, which means they are
sometimes bolder and sometimes more foolhardy, because a Google-branded
gPhone — two of them, actually — is on the way.
Here is what little I know, dropped in my lap this week by a loyal
reader (you know who you are). There are two gPhones slated for release
with the first coming in September and the second probably not
appearing until after Christmas. Given that the first is the high-end
model and the second is cheaper, Google will probably expect to make as
much money as possible on the higher-margin units at Christmas before
revealing the budget model even exists. How Apple-like, eh?
Both will include WiFi, which makes me wonder if a VoIP client will
be there, too. The high-end phone will look somewhat like a Blackberry
Pearl, but the screen flips up and there is a keyboard for texting. No
word on pricing for the high-end phone, but the second model is
intended to be less than $100 — AFTER Christmas.
The actual manufacturer of these gPhones will be Samsung (rumors to
this point had indicated HTC, so this is a change) and Google is still
talking with both T-Mobile and Verizon as potential carriers (rumors
also said Verizon had passed — not). That means there are both GSM and
W-CDMA versions in the works. Given AT&T’s success with the iPhone
I can’t imagine Verizon will let the gPhone pass, but it will be
interesting to see if Google will be able go with a nonexclusive deal
and get both U.S. carriers.
Via Robert Cringely