Keith Watanabe * NET 2.0

A lot of put are putting the emphasis in speculating on whether or not the deal will go through.  But I haven't read many opinions on why M$ is doing this in the first place.  Why would a company with this level of market share want to compete in a congested playing field?  Why are they targeting Google in allying up with Yahoo?

My feeling about this deal is that it's a personal agenda item from Steve Ballmer.  It's been well documented on Ballmer's personal attacks against Google and his desire to put an end to them.  It's kinda strange because I don't think a lot of businesses are quickly converting over to Google in terms of their office software.  A lot of companies still employee and will probably continue to employee M$ Office just for compatibility in sharing documents between other businesses.  I mean, Open Office probably does a better job than Google's Apps for handling M$ Office compatibility issues.  And by the time Google can rival M$ on these areas, M$ just has to create further incompatibilities.  In other words, M$ will continue to make a boatload of money from their desktop products and can mutually survive with Google in the playing field.

So why would M$ fear Google?

I don't think that M$ honestly fears Google at all.  I think the reason for this mess is that Steve Ballmer is fearing for his position as CEO of M$. 

M$ in the past few years has been for the most part a joke.  Some items on my list to ridicule M$ on are:

• Vista.  Bloated, people are asking for XP.  Not a good sign.
• XBox.  At one time, M$ was losing money for each XBox produced.  Other companies are excelling in the game industry and M$ isn't the only one in the field.
• Zune.  iPod holds the better product and M$ was just far too late to get into this playing field.
• MSN.  It just sucks.  Face it.
• Live/Spaces.  M$ doesn't understand the web and never will.
• Ads.  Google owns with Yahoo being the closest second.
• Firefox catching up in terms of market share compared with MSIE.  IE is a terrible product and is a cause for many viruses on the web with its insecurities.
• Security.  M$ has the worst record for security.

And so on.  M$ has just an awful track record in the past few years.  And who's at the helm?

Steve Ballmer

What does that say?  While Google made headway as the fastest and largest growing software company around (and it's funny calling them a software company), M$ has been nothing but the biggest butt of jokes.  Steve Ballmer hasn't done a thing to take M$ ahead of the game because he's just a pointy haired boss.  He's not a visionary like Gates, he never was a tech guy.  He's just an operations fellow who managed to move up because of his past relationship with Paul and Bill.

With such a list of failures, I'm certain numerous people within the company and shareholders alike are calling for Ballmer's head in the near term future, kinda like how people wanted to impeach George Bush for his failures.  Well, their product line ups have failed in not being able to copy as successfully as their competitors.  And bullying is no longer an option at this point because they lack the market share in the internet compared with Yahoo and Google.  So their last resort in M$'s typical business tactics is to buy.

If the deal went through, Ballmer might initially look like a star.  He'd have his place in M$ history as being the guy who had slain the ancient dominant dragon of Yahoo sitting on a mound of global shares of wealth and connections.  He would get his 2-3 year extension as CEO and probably receive renumeration in shares from the deal with Yahoo, making him one of the most powerful CEOs around.

It's purely ego driven.

What it isn't is solid business sense.

This is the deal that will honestly kill M$ in the long term.  I think Ballmer will promise Yahoo and M$'s shareholders of being able to reorganize and turnaround both companies in being able to compete in the market place against Google.  Initially, shareholders thrilled at hearing news will become emotional, not really seeing that this ploy is simply a tactic to buy time for Ballmer's lack of vision.  Heads will roll at both companies, more likely Yahoo's than M$'s.  Products will be deactivated or slashed out of existence.  Fights will occur between teams.  There might even be a stupid notion of trying to migrate the entire Yahoo platform onto Windows.  That would definitely destroy everything Yahoo has built.  Look at Hotmail when they tried to migrate it to NT.  How can either company do anything productive while organizational battles go on to survive within both companies?  How can innovation thrive in a big re-organization?

Look at the HP-Compaq merger.  It took them about 3 years before things came about.  In the meantime, other players like Gateway/Emachines and Dell surged.  The HP-Compaq merger offended a lot of veteran HP employees.  Certainly, the policies between Yahoo and M$ would differ enough to cause cultural clashes between both companies.

But I think that the market in the internet is far more competitive and more agile than the PC hardware market.  Applications can be built faster and better than selling a PC at lower cost.  In the internet market, you have to blast out applications at a rapid pace and innovate where your competitors are not focusing their strengths.  Google has a culture of the 20% rule.  With the threat of M$-Yahoo, this rule might be the key for Google's survival.

And probably some of the most valuable employees that Yahoo will lose are their engineering team.  I can easily see engineers leaving by the dozens while Google offers them a safe haven.  You gotta think about how an engineer inside Yahoo might react.  I'm certain many Yahoo engineers love Linux, love open source and hate Windows.  The very thought of having to use a restricted proprietary system would make them want to leave.  And I'm certain many of these people are highly motivated and extremely bright, wanting to get their chance at their own 20% rule that probably was killed off when Terry Semel took hold of the reigns in Yahoo.

Either way, this deal only has one benefactor: Ballmer.  But he's not going to be the star he believes he's making himself into.  He's going to be another Carly, and at the end of the day, he's going to have a miserable farewell and will be ridiculed as a visionless, do-little CEO.