After falling off the radar screens for several weeks, Microsoft's proposed merger with Yahoo is back in the news feeds. First, Ballmer sent a letter to the Yahoo board, drawing a three week line in the sand after which Microsoft would (possibly) lower its bid and/or start a proxy battle that could lead to the replacement of Yahoo's directors. Next, Yahoo tried an ad-sense linkup with Google to see if it can eke out more revenue by...extending Google's ad reach (an odd gambit, in my opinion, as that would seem to make Google's ad network that much more valuable, and be a vote of no-confidence in their own).
Just to mix things up a bit, rumor has it that Microsoft might double up with Rupert Murdoch's News Corp on the bid. This would make a rather formidable grouping of Internet media sites, including MSN, Yahoo, MySpace, and two major news networks (MSNBC and Fox). If Microsoft could keep Facebook, another ally, happy, it would have deep linkages into all the major social networking sites.
That would surely boost the value of the Microsoft / Yahoo ad network, which is the whole point to this proposed merger (in my opinion), and the likely reason that Google is tripping over itself to prevent the merger from happening.
I still, however, can't get over my vague unease about the whole project. Granted, I understand completely why Microsoft executives are interested in doing this. Monetizing free (as in cost) software is essential now, and will only become more so in the future. Further, with News Corp's possible involvement, the scope of the deal starts to reach ground-shifting proportions (as are the sums of money involved).
My concerns, however, are more cultural...at least from a Microsoft standpoint. Assuming that the merger goes forward, with or without News Corp's partnership, I'm left wondering what kind of company Microsoft would be in the aftermath?
When I asked that question awhile ago in a piece searching for a core identity, Mr. Kidding (of "Yagotta B." fame) noted that I would have an equally hard time finding a central theme in General Electric's business. There are, however, fundamental differences between GE and a software - or even computer hardware - company.
Most IT companies I can think of have some form of readily-identifiable central theme. Apple is a maker of consumer-oriented hardware products. Oracle is a maker of databases and the software that feeds it. Skype is a maker of communications products, even if they have tie-ins to online auctions sites (which makes sense, as eBay now owns them).
Google is harder, though I would call them mostly a web software company backed by the revenue gusher of the most successful Internet ad network in existence. Though they are diving off into non-web application directions (e.g. the Android SDK), I would argue that has more to do with Google's desire to extend the web platform onto as many devices as possible, using that reach as a "Trojan horse" for their ad network.
Oddballs do exist, such as IBM. There was once a time when it was pretty clear what IBM did. They made hardware, for the most part, and their software business was viewed more as something that made their hardware valuable (though that is still to a certain extent the case as software sales as such are not an important part of their business; that makes it easier for them to enthusiastically embrace open source across its product lines). These days, however, one would have to argue that consulting holds a cherished place in their revenue temple, and patent licensing has turned into a massive business in its own right.
Perhaps IBM is an instructive example. It's easier to have clarity of purpose when you are a smaller company. A large company like Microsoft, however, is going to have a lot more product stakes in the fire. Perhaps it's natural for large IT companies to end up looking like IBM. That doesn't mean, however, that there isn't value in trying to create a core identity that is rigorously applied across business lines.
I've proposed that Microsoft should embrace its platform core, as it constitutes a unique competitive advantage on Microsoft's part. Embracing it more fully would mean there should be more top-down central control over technologies used across product lines than Microsoft historically has been comfortable imposing.
I don't think that it's worth stopping a merger with Yahoo to sit around navel-gazing about existential issues related to Microsoft culture. I do, however, think it's important, and think it would help greatly in the merger of cultures that automatically comes with a merger of corporate entities.