Google forces Microsoft's hand
mo at ccr.org
Mon Feb 4 22:23:01 CST 2008
the Yahoo deal is an act of overt desperation.
Gates left the bridge in plenty of time for it to
be firmly on Ballmer's watch when they discover that
the G/S Microsoft has been fatally holed.
Ballmer is looking at an epitaph reading"
"He managed to sink Microsoft."
and he is scared shitless.
I will give him points for being scared -
at least the lizard brain is still functioning.
ps - G/S is "Garbage Scow"
andre kesteloot wrote:
> International Herald Tribune <http://www.iht.com> Google forces
> Microsoft's hand By Steve Lohr
> Saturday, February 2, 2008
> Bill Gates, Microsoft's chairman and global philanthropist, called upon
> fellow business leaders at Davos last week to pursue a kinder form of
> But on Friday, the brand of capitalism practiced at his company by the
> company's chief executive, Steve Ballmer, came with a decidedly hard edge.
> The $44.6-billion bid for Yahoo, led by Ballmer, was hostile. And during
> a conference call on Friday with analysts and in a subsequent interview,
> he never once uttered the word "Google," alluding to the Internet search
> giant that has humbled Microsoft only as "the leader" in the online world.
> Ballmer, 51, is a famously fierce competitor. To him, failure is never
> an option. "If we don't get it right at first, we'll just keep coming
> and coming and coming and coming," he said in an earlier interview.
> Microsoft's bid for Yahoo is thus a tacit, and difficult, admission that
> it didn't get its online business right. The takeover attempt also
> represents a sharp departure from Microsoft's well-thumbed playbook of
> building new businesses on its own.
> In the past, when Microsoft moved beyond its stronghold in desktop
> personal computer software - and into areas like Xbox video games and
> data-center software - it has done so mainly with in-house investment,
> patience and tenacity.
> Microsoft stuck to that formula for years in the online business of
> Internet search and advertising - without success. It did purchase an
> online ad agency, aQuantive, last May for $6 billion, a sizable move for
> Microsoft given its tradition of making small, niche-filling acquisitions.
> But losses continue to mount in Microsoft's online business, while
> Google makes billions in profit.
> The Google challenge to Microsoft extends beyond online search and
> advertising. Google is at the forefront of companies offering software
> as a service over the Internet, including Web-based alternatives to
> Microsoft's lucrative desktop products like word processing,
> spreadsheets and presentation programs.
> Gates, Microsoft's largest shareholder, has said that Google is the
> company that most reminds him of Microsoft in terms of its broad
> ambitions and demanding corporate culture. Gates, who is spending more
> time on philanthropy these days, blessed the Yahoo bid, but it is
> Ballmer's brainchild.
> And Ballmer clearly views the Yahoo bid, and the Google threat, in broad
> terms. A Yahoo deal, he said, would represent "the next major milestone
> in Microsoft's transformation."
> Microsoft, too, is moving to offer more software features as Web-based
> services, though it sees a future that revolves around both personal
> computer software and online services. Microsoft calls its approach
> "software plus services."
> Ballmer said Friday that analysts who regard it as a grudging, defensive
> tactic underestimate the company's intentions. More and more of the
> software capabilities of the Windows operating system and Office
> productivity programs will be offered as online services. Buying Yahoo,
> he said, would be a big further commitment in that direction.
> "Ballmer is absolutely determined to move Microsoft from the old model
> centered on personal computer software to the new model where software
> is increasingly an online service," said George Colony, chief executive
> of Forrester Research.
> Microsoft has been forced to adopt a new strategy for a different kind
> of threat than it has confronted, and usually dispatched, in the past.
> "This shows just how worried Microsoft is by Google," said David Yoffie,
> a professor at the Harvard Business School. "Microsoft has faced
> competitive threats before, but none with the size, strength,
> profitability and momentum of Google."
> In the conference call, Ballmer conceded that Microsoft needed a big
> move to try to catch up in the online business to the big competitor
> that he notably declined to name. "The market continues to grow and the
> leader continues to consolidate position," he said.
> Microsoft, analysts say, finds itself in a battle where improving its
> search algorithms and online ad software is not going to be enough.
> Google has impressive technology, to be sure, but it also enjoys the
> torrid growth that falls to the leader in highly networked businesses
> like Internet search and ads.
> Google's edge in search traffic then attracts more advertisers and Web
> publishers, so there are more ads in Google's auctions, which makes them
> more efficient. Each advantage reinforces the other, in what economists
> call "network effects."
> One measure of the network advantage, analysts estimate, is that Google
> collects 40 percent to 100 percent more revenue per search than either
> Yahoo or Microsoft.
> Microsoft, of course, is no stranger to the power of network effects. It
> was the master of that strategy in the personal computer era. Its early
> lead in PC operating systems, and its efforts to encourage independent
> software developers to write applications for Windows, paved the way for
> Microsoft's dominance.
> More programs ran on Windows than on any other operating system, so more
> users bought PCs running Windows. Apple, by contrast, never built up the
> developer network as Microsoft did.
> In the Internet era, network effects are working against Microsoft in
> its competition with Google.
> With the Yahoo bid, Microsoft, analysts say, is trying to buy a big
> enough share of the market to be a credible alternative to Google with
> online advertisers - "a competitive and compelling No. 2," as one
> Microsoft executive put it.
> In the most recent quarter, Microsoft had online revenue of $863
> million, compared with Google's $4.8 billion in quarterly revenue. Yahoo
> and Microsoft together had more than $2.6 billion in revenue, still
> trailing well behind Google but in a far stronger competitive position.
> But the trends in online advertising are working to Google's advantage
> as it continues to gain share. The more Google's momentum accelerates,
> the more difficult it will be for Microsoft to catch up, no matter how
> much it might improve its search technology.
> While $44.6 billion is a hefty price tag, many analysts say it will be
> worth it for Microsoft if it can close the gap with Google. On Wall
> Street, Microsoft suffers from the perception that it is several steps
> behind in the march toward the Internet future.
> Microsoft, analysts note, has grown solidly for years, but investors
> give it little credit. The software giant's stock price has long been
> stagnant, despite its extremely profitable businesses. Its Office
> division alone had quarterly revenues of $4.8 billion - equal to Google
> - and an astronomical $3.2 billion in operating profits. Its Windows
> unit is even more profitable.
> "Microsoft needs to show that it is going to make the online business
> work, and this is about shaking things up that needed shaking up," said
> Charles di Bona, an analyst for Sanford C. Bernstein.
> Ballmer agrees. He said he "personally thought long and hard" about the
> Yahoo bid and eventually became convinced it was the "right path."
> Asked whether the move amounted to an admission of failure of its
> earlier strategy, Ballmer replied that some people might take that view.
> "But I made the judgment that, for the long-term health of this company,
> and for the long-term interests of our shareholders, that acquiring
> Yahoo is a good thing," he said.
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