Keith Watanabe * NET 2.0

A quick update on the whole M$-Yahoo deal from CNET says that Yahoo reportedly will reject M$'s deal with a full formal reply on Monday.  Different reasons for this are possibly to up the ante in terms of getting more money from M$ as well as a potential poison pill effort.

I've stated it before that the whole deal is just nasty.  I'm certain many on the inside of Yahoo and other companies certainly fear, detest and want to avoid this deal at all cost.  However, because this involves purely money, shareholders, being the sheep that they are, probably are thinking of the short term value that they can from such a deal.  Some are calling this move from M$ a hostile takeover, since it's basically a bribe to Yahoo's shareholders in order to lay claims to the company.  And of course, I'm just against the idea completely.

Some writers, like Arlington from TechCrunch, feel otherwise in terms of turning around the company.  While I'm not certain if Jerry Yang is the person that can do this enormous job after the damage Terry Semel caused the company, I do think that Yahoo has to plan for the long term.  I think writers like Arlington are "stuck in the valley" and don't view things from a global perspective, nor from a wider perspective.  He did write up a better analysis of the theoretical acquisition which would cause the company to bloat and reduce near term action.  But his position still is in this mystical long term view of the value of Yahoo.

To me, big mergers just don't work out and there are many cases in history to demonstrate where these incompatibilities disrupted and destroyed the foundations of some good companies.  My coworker and I discussed this issue and pointed out how companies like AOL-TimeWarner really fell apart, and that now AOL is just losing money.  Or think about the HP-Compaq merger done by Carly.  It simply hindered the old engineering corporate culture that HP was famous for by adapting the HR practices put forth by Compaq.  Or in Japan, look at the disaster that came out from the whole Mizuho banking merger of three major banks.  It did position Mizuho higher than many other companies, but they went through their own disasters initially when they rushed the roll out of their combined ATM systems.

I think acquisitions work far better on a smaller scale.  Certainly, M$ is indeed larger than Yahoo.  Look at the market cap, the amount of money in the bank, their annual gross and the number of employees they have.  But Yahoo is still a large, powerful company with a strong culture and sense of identity.  This isn't a situation where you have M$ buying out a limited player like Facebook, or ebay purchasing StumbleUpon.  This is clearly a threat and everyone in the industry, minus those shareholders, know it.

I've emphasized what Yahoo needs to do to succeed.  Becoming community oriented, opening up their data APIs for developers, becoming a company to act as a technological venture company for young businesses and re-utilizing their infrastructure so that existing businesses don't have to re-invent scalability and reliability each time.  These are Yahoo's strengths but they have yet to monetize them in a sensible way.  Becoming a WebOS/creative platform for people to build the next generation of internet properties are what these giants should leverage their technology for.  And it makes a lot of sense to me.

For instance, I was talking to my friend who works at my previous company.  They have a VERY poor (global) support model.  The local infrastructure particularly is setup incredibly poor that there's no good ways to handle things like VPN, mass software installation, server maintenance, etc.  The chief problem is that the company had piss poor people who are of the lowest caliber.  A company like this who wants to have the killer applications running efficiently and doing seamless deployments is someone who would make a great candidate for a company like Yahoo to host their applications.  DBAs, System administrators, network support people, security administrators, etc. are practically a dime a dozen.  Getting solid versions of these types to build up a killer infrastructure are rare compared to the number of these out there.  But truthfully, the types of infrastructure that most companies want are not too dissimilar.  They want the three tiered architecture, the app servers, the web servers, etc.  Most companies spend needless amounts and probably would be better off spending their money on pure development, since development requires a high degree of creativity that implements the business ideas (whereas support are not really related as closely by comparison).

So having Yahoo handle the infrastructure setup right down to the deployment methodology would solve a lot of companies' IT problems.  You wouldn't need to perform due diligence against a shady consulting company claiming that they can handle some top down solution, especially if their track record is hidden from view.  You'd also avoid getting those so-called "shadow IT" departments where business people end up setting up their own infrastructure because the core IT team is either too restrictive, too backlogged or just too dumb and lazy to give the business what it wants. 

With a Yahoo, imagine what you'd get.  A trustworthy name containing all the solutions a business needs.  You'd have your email, your single sign on,  your chat, your APIs, your 24/7 up servers, your global support, the raw network speed, etc.  It makes perfect sense.

Jerry Yang, this is my gift to you.  My view of what Yahoo should focus on.  Call it Yahoo Enterprise Business.