Apr 11 2008
Why Microsoft wants Yahoo!
Probably the hottest news abuzz this year is the looming merger — some say hostile takeover — between Microsoft and Yahoo. Earlier, it was about the resistance on the part of Yahoo to capitulate to the software giant. Lately, the focus has shifted to Redmond and the perceived motive behind their bid to acquire the second largest search engine.
Very recently, two analysts from Gartner, a research services firm, asserted that Microsoft is now on shaky ground due to the state of Windows Vista, which they described as “collapsing”. The analysts, Michael Silver and Neil MacDonald, practically assessed the latest version of the Windows OS as a failure due to disappointingly low market acceptance. According to a rival firm, Forrester Research, by the end of 2007, only a little more than 6% of enterprise-level PC users had migrated to Vista.
The main reason cited for the poor sales performance is the lack of understanding among general users of what makes Vista so much better than Windows XP. And for those who do know, many of them are turned off by the resource-hungriness of Vista. Also, it’s reported that most of those who have adopted the latest OS were users of the nearly-extinct Windows 2000; apparently, Windows XP users (like me) are staying put.
Gartner is now widely quoted as saying that Microsoft is in an “untenable” situation. It predicts that Microsoft Corp. could be in financial straits by 2011 due to a presumed thinning of the latter’s market base. The firm further forecasts that a large number of technology users will be shifting to “OS-agnostic applications” (computer programs not dependent on what operating system is installed), thereby adversely affecting another area that has been dominated by Microsoft: office productivity suites. A prime analogy would be Google Apps, which competes with Microsoft Office.
The Google Apps suite — documents, spreadsheets, presentations, calendar, email, and even more to come — is deployed over the Web, and so is made available to anyone for free, regardless of what’s making his or her computer run. Increased acceptance of such systems could very well erode Microsoft’s revenues from MS Office, reportedly $16 billion in 2007 (including Exchange Server, which allows Office applications to be deployed across the Internet, among other things).
Gartner then proceeded to explore the notion that this is what’s inducing Microsoft to get its hands on Yahoo: to finally capture, and capitalize on, the Internet-ads history (and potential) of the first search engine to gain worldwide attention.
True, virtually every Web venture is targeting Internet advertising as a source of huge revenue. Even Google is in the bandwagon (if it’s not, in fact, the horse). Microsoft, however, has remained staunchly a software publisher and provider, and has ruled over this landscape for a couple of generations. Therefore, isn’t it rather a stretch to assume that this particular Goliath will just keel over and die?
The points made by Gartner are worth looking over. But, in my opinion, MS Office and Windows (perhaps not Vista but the keenly-anticipated Windows 7) are here to stay for longer than anyone might care to imagine.
So, why does Microsoft want to have Yahoo!? At this point, it’s still anybody’s best guess. My take on this is: isn’t it but natural for a business to proceed into further territory?
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