Analysis of IT news

Wednesday, February 06, 2008

News item: Microsoft makes a $44.6 billion offer for Yahoo!

News item: Microsoft makes a $44.6 billion offer for Yahoo!

Analysis: it's not the first time that Microsoft is the underdog in a market, but a $44.6 billion (a 62% premium) is unheard of from Redmond who is known to be notoriously cheap. It has indeed often managed to pay very little for a lot of acquisitions. Hotmail is a notable exception, although I suspect it had to do with the dotcom craze of the time. But that was then, and entrepreneurs who used to build companies in the hope of selling them to Microsoft now hope to be the next YouTube and be snatched by Google.

After investing $240 million in Facebook for a paltry 1.6% of the company, being ready to pay a 62% premium for Yahoo! indicates how Microsoft has run out of ideas to compete with Google. With Bill Gates leaving the company to focus on his foundation, this is the end of an era for Microsoft.

Now, that doesn't mean that Microsoft will never catch up with Google. Redmond's strategy has always been to keep pounding until the competition makes a fatal mistake. But things aren't so easy this time. And Bill's departure doesn't affect anything.

Contrary to what a lot of people say, Bill is no visionary. His main vision was to foresee the rise of the PC, but that's about it. His book "The road again" completely missed the Internet. His next book, "Internet at the speed of thought", contains banalities and is more an attempt to place himself at an authoritative figure of the Internet. And all his "predictions" have have more been self-fulfilled prophecy attempts than anything else. Last but not least, he didn't see the rise of Google.

Bill Gates is however a very savvy businessman and a great strategist who has known how to capture the PC market by partnering with and then betraying IBM. Later, he has known how to leverage this desktop dominance to conquer other markets.

But on the Internet Microsoft doesn't have its usual edge. There is not an IBM equivalent who "owns" the Internet and with whom Redmond could strike a partnership in order to steal the whole market later. And its dominance on markets such as the desktop and the Web browser does not help one bit.

To be fair, Microsoft has managed to overthrow a market leader in a market where neither conditions applied either: the video game industry. Redmond capitalized on Sony's mistakes with the PS3 to launch the XBox 360... only to see Nintendo steal the victory with the Wii.

So to get back to the online advertising market, Yahoo's acquisition by Microsoft (if it goes through) would help Redmond try to catch up with Google. But it will take more than that to derail Google. Just like Microsoft beat AOL because of AOL's mistakes (its merger with Warner Bros), Redmond might need Google to make a mistake.


  • L'erreur de Google viendra forcément. Ou même, elle a déjà eu lieu mais il est trop tôt pour le réaliser.
    Mais, cette fois, il faudra aussi compter avec les erreurs de MS car la société en fait plus que d'habitude en ce moment...

    By Blogger Lefebvre, at 4:09 AM  

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