Microhoo update: Culture clash, Alibaba and board room politics

Microhoo update: Culture clash, Alibaba and board room politics

Summary: With the tech world on holiday in the U.S. for President's Day, the fate of Yahoo still hangs in the balance.

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With the tech world on holiday in the U.S. for President's Day, the fate of Yahoo still hangs in the balance. That's doesn't mean the blogosphere has been taking a vacation from the topic.

In the NYT, John Markoff and Matt Richtel write about the culture clash on technology that would ensue if the Yahoo fell to Microsoft:

 

When it comes to technology, Microsoft and Yahoo “are completely at odds with one another,” said Rob Solomon, chief executive of SideStep, a travel-related search engine. He was a Yahoo executive in charge of shopping, auctions, travel and real estate before leaving the company in 2006.

Microsoft must figure out how to integrate the two complex and almost entirely incompatible software systems that the companies use to run their vast Internet data centers.

The article cites past integration problems, such as with moving its Hotmail email acquisition from non-Microsoft systems to a proper Microsoft platform. Microsoft prefers its own proprietary software stack, whereas Yahoo is build primarily on open source software, such FreeBSD Unix and Java.

I would like to think that Microsoft has learned a few lessons on the technology religion front. It's not as if allowing Yahoo to maintains its non-Microsoft stack would negatively impact the Windows business. Shifting Yahoo to a Windows-centric platform would be a huge undertaking. If that is the plan, shareholders should be apprised of the risks and estimated costs in the regulatory filings.

The battleground is shifting from client/server solutions where Windows ruled as a brand and underlying technology to the Internet. Users don't care what runs in the background as long as it is reliable, fast and doesn't result in higher cost. The big winners in the future will run giant, super efficient data centers and serve up applications via the cloud to billions of users. Microsoft needs to think more like a utility provider and giant portal than just a Windows software company.

The future for Microsoft is "Live" and Yahoo "Live" wouldn't need to be saturated with Windows.

In other Microhoo news, Kara Swisher lays out how she thinks the Yahoo board members are leaning on a union with Microsoft and lays blame for the current situation at the feet of the board. The board is not unified in how to move forward, but a sweetened offer from Microsoft would allow them at least to save face.

So, rather than some mano-a-mano between CEO and Co-Founder Jerry Yang and newly installed Chairman Roy Bostock, getting ready to rumble like this is the Sharks and the Jets, try to remember that these are the exact same cast of characters–now simply minus former CEO and Chairman Terry Semel–that has been too sanguine as the situation at Yahoo has deteriorated.

In fact, one of the more consistent characteristics of Yahoo over the past few years has been its dithering nature and its not-so-engaged board has been a prime locus of that.

Reuters and the WSJ report that the China-based Alibaba Group, of which Yahoo owns 39 percent, wants to have a say in the matter. The Reuters report states:

The problem is a perception by Beijing authorities that an important Chinese firm could come under the control of Microsoft Corp (NasdaqGS:MSFT - News), which has a reputation of using monopolistic tactics, said the source, who is familiar with a team of bankers and lawyers assembled by Alibaba to review its options.

Larry addressed Alibaba's injection into the deal in an earlier post:

This is bad news for Yahoo. Really bad. Why? If Yahoo wants Microsoft to raise its bid, say to $34 a share or even $40 a share, the company has to argue that its core business and holdings in Alibaba are worth more. That case gets a lot harder if Alibaba further distances itself from Yahoo and ensures its independence. Alibaba is prime real estate that Yahoo could even have to divest if Microsoft acquired the company. Yahoo owns about 39 percent of Alibaba.

Good luck getting to $40 a share from Microsoft with those moving parts.

Yahoo CEO Jerry Yang made it clear in his recent shareholder letter that the company views its holdings abroad as one of the reasons it is worth more. In the letter, Yang said:

We have the added value of our substantial, unconsolidated investments in Japan and China. We have substantial positions in Yahoo! Japan, the leader in its market, and Alibaba, which is strongly positioned in China, a market with enormous growth potential.

If Alibaba arranges more independence from Yahoo in the event of a Microsoft merger a nice chunk of that added value goes kaput. And along with it goes the argument that Yahoo is worth more than $31 a share.

Topics: Social Enterprise, CXO, Enterprise Software, Legal, Microsoft, Operating Systems, Software, Windows

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15 comments
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  • Ironic reference to Hotmail?

    Hotmail currently runs on Sun Solaris, it fell over when the tried to convert it from BSD to a Windows based Exchange server (or something similar).
    B.O.F.H.
    • Hotmail runs Server 2003

      That's not true. Hotmail is running Server 2003.

      Proof --> http://toolbar.netcraft.com/site_report?url=http://www.hotmail.com
      shassouneh
      • Fine, you win... the guy in charge of MSN doesn't know what he is managing.

        If you are unfamiliar with the internal workings of the service or how to game things like Netcraft, that is fine. I have from internal sources and a contracting agency (Microsoft uses agencies, thus the permatemp issue of past) that what they wanted me to do was administer Solaris (btw, what do you think Microsoft got from their deal with Sun during the EU trial?) and not Windows. But what would the people involved with Hotmail or MSN know, right?
        B.O.F.H.
        • Fine, you win... nuff said (nt)

          .
          No_Ax_to_Grind
          • Still, Netcraft only tells us what is running on the front end, and that

            can be spoofed. But, having said that, I would be very surprised if MS would run Solaris, because it would be VERY embarrassing and would get out eventually.
            DonnieBoy
          • Thanks, DB, you made OUR point without even realizing it

            On the other discussions you dance around and claim that Microsoft buying yahoo would cause all this "culture shock" and mass exodus as they would switch all the servers over to Windows, then come here and dance around and claim that Microsoft is still running hotmail on Unix servers, meaning they [i]did not[/i] change everything over to Windows, so no culture shock or mass exodus.

            Without realizing it, you just validated other posters points that Microsoft will not do what you claim, effectivelly contridicting yourself, and thereby invalidating your arguments on that subject to date.

            Thanks for proving us right!
            GuidingLight
          • Do you recall what you were thinking when you made this post?

            [url=http://talkback.zdnet.com/5208-3513-0.html?forumID=1&threadID=5647&messageID=116053&start=-9898]I believe they are talking about Samba running on Windows.[/url]

            Or roughly two thirds of all Samba installs...
            [b]Posted by:[/b] No_Ax_to_Grind [b]Posted on:[/b] 09/30/04
            B.O.F.H.
        • To play devil's advocate

          I have from internal sources and a contracting agency that Ubuntu and Red Hat both run Windows Server2003, that only the web servers run Linux.

          Do you have any reason to doubt me?
          GuidingLight
          • Funny (humerous) but here is the run down:

            Here is how the deal goes:

            1) During the EU Anti-Trust case, Microsft started settling with several companies, to the tune of $4 billion (documented), including $1.7 billion to Sun Microsystems.
            2) When Microsoft acquired Hotmail, it ran on BSD, they tried to convert it to the version of Exchange that existed at the time and it failed (fell over). When they settled with Sun, they signed a contract with Sun for some hardware to run Hotmail on and the hardware ran Solaris.
            3) Microsoft looks for contractors to do various tasks (often called permatemps these days) and one of these tasks is running the server back end for Hotmail (which required Solaris skills).
            4) The person in charge of MSN and related services at the time was Mitch Wile, who contacted me (don't ask why, my resume has been on line for years..., this is some of what I do).
            5) The agency that they use for temps that handle this asked Solaris questions only during the interview.
            6) It just isn't that hard to spoof a host signature or place servers as intermediaries between the back end hosts and the external internet (as in, what is in your DMZ).

            Personally, I don't really care if you buy this, contact Mitch or write this description off. They still use Solaris.

            You never know who posts on ZDNet forums...
            B.O.F.H.
          • Exchange? I highly doubt it

            I highly doubt there was any desire or attempt to make Hotmail run on Exchange. Exchange is designed for corporations with maybe users in the hundreds of thousands, tops, not for hundreds of millions of users like Hotmail has.
            PB_z
      • Well, at least they run Server2003 for the front end. That does not tell us

        the back-end infrastructure. But, I would be very surprised if MS used Solaris, it would just be too embarrassing, and it would get out eventually.
        DonnieBoy
  • I think people are assuming for too much.

    First, there would be no reason for MS to be in any hurry to switch over to Windows. In fact it would make more sense to leave what is there in place and gradually replace it with new offerings built on MS tech. (Silverlight, WPF, etc.)

    Alibaba nervous? That may well be true but my feeling is that they have been able to do whatever they wanted and Yahoo simply (Yahoo can't even manage itself) went along for the ride and they fear that will change under MS control. I suspect they are right. Shrug...

    All I really see here is a board that has stood by and watched Yahoo tank and did nothing about it. Now they think someone is ging to ride in and rescue them from market forces and a forced buy out. They need to look at things realistically, or they will be replaced in the next few months as stockholders get fed up with their constant failures and foot dragging with Microsoft's offer.

    Folks, complain, whine and rant all you want but in the end it all comes down to dollars and what the stockholders (owners) want.
    No_Ax_to_Grind
    • Silverlight and WPF... too little too late...thank God! - NT

      NT
      raycote
  • Tech world on holiday in the US?

    What tech world are you talking about? Maybe tech *journalists* take the day off, but the rest of us are still hard at work...
    PB_z
  • YAHMIC! vs. Microhoo.

    Battle of the web wannabees.
    http://yahmic.com
    http://microhoo.com
    billy yang