Archive for March 8th, 2008

Microsoft, The Jekyll And Hyde Of Companies

Duncan Riley


Mix Conference in Las Vegas. The event is Microsoft’s web focused get together where they talk coding and development with mostly white, geek guys (the only women seemed to be the Microsoft/ events staff), then there’s the occasional press person thrown in for good measure.The coverage the event gets pales in significance to say an Apple event (Apple could open a door and probably still get more coverage) but the coverage doesn’t do it full justice because there were some interesting things (see our coverage as follows: keynote 1, keynote 2, Web 2.0 session, Mesh networking).

What I did see during my time at the conference was the stark contrast between the old Microsoft and new Microsoft. The new Microsoft is embracing web standards, providing support for OS X and Linux, and listening and responding to customer feedback. The tech might not always be the absolute best in the market, but its coming ahead in leaps and bounds. I got 20 minutes with Microsoft VP Scott Guthrie (interview here) and the talk was refreshing.

ms21.jpgAnd then there was the old Microsoft. Steve Ballmer at keynote two made fun of Apple products, joked about Apple’s market share, and constantly justified Microsoft’s position based on its domination of the market. No serious talk about moving forward, improving the end user experience with Windows….as long as Microsoft has the dominant market share the rest doesn’t matter much to Ballmer. The fact that Apple is selling more Macs then ever because of Vista’s issues means nothing to him. Old arrogant Microsoft.

Then there’s the other products that are completely lost. As part of my press accreditation I received a free 8gb Zune. They don’t sell Zunes where I come from so I had no negative expectations for it because I’d never seen one before. So I bring it back to my hotel room and on the screen it tells me I have to visit the Zune site to make it work. Great, get to the Zune site, tells me I have to download software to make it work….which is only available for Windows, not OS X (my laptop doesn’t have a copy of Windows on it). There’s an open source alternative that lets you get into the Zune, but doesn’t provide any decent functionality…and it doesn’t unlock it from its default opening state. Zune=brick to me. On one hand people like Scott Guthrie and others are talking cross platform support, on the other the department in Microsoft which makes the Zune has decided that cross platform support isn’t important. The Jekyl and Hype side of Microsoft once again.

Microsoft is a company with a lot of good people doing amazing things, but those people are like a horse that has been handicapped out of the race with the baggage of Microsoft old. They are putting up a good fight to be seen and listened to, but it’s a hard ask. Microsoft is clearly a company that is changing, the only remaining question is will the whole organization transform into the new Microsoft quickly enough to survive the rapidly changing way companies and individuals interact with technology.

disclosure: Microsoft Australia arranged the trip, thanks to Nick Hodge for organizing it

Microsoft image
Website: www.microsoft.com
Location: United States
IPO: March 13, 1986
Scott Guthrie image
Website: www.microsoft.com
Companies: Microsoft

Scott Guthrie is a vice president in the Microsoft Developer Division. He runs the development teams that build ASP.NET, Common Language Runtime (CLR), Windows Presentation Foundation (WPF), Silverlight, Windows Forms, Internet Information Services… Learn More

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Mar 1, 4:47 AM EST

Tellme’s Tale As Microsoft Subsidiary

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MOUNTAIN VIEW, Calif. (AP) — Mike McCue hasn’t talked to Yahoo Inc. co-founder Jerry Yang since Microsoft Corp. ambushed the Internet pioneer with an unsolicited takeover bid a month ago.

But McCue would like his old friend to know that becoming a Silicon Valley subsidiary of the world’s largest software maker can work out well.

Becoming a cog in a corporate machine isn’t something McCue had in mind during the eight years that he spent building Tellme, which makes the technology behind directory assistance and other voice-controlled services. It ranks as Microsoft’s largest Silicon Valley acquisition so far.

After Tellme began making money in 2004, McCue envisioned the Mountain View-based company would remain independent so it could eventually make an initial public offering of stock.

But his feelings changed after Microsoft’s chief executive, Steve Ballmer, persuaded him to fly up to Seattle to meet two days before last year’s Super Bowl.

After being assured that Tellme would be able to retain its Silicon Valley office, identity and quirky culture, McCue negotiated an $800 million sale to Microsoft and agreed to stay on as general manager. It’s a decision that he says he doesn’t regret 10 months into the marriage.

“We are pretty much doing everything we were doing before – just a lot more of it,” said McCue, 40.

Because of the vast differences in size, the Tellme deal obviously isn’t an apples-to-apples comparison to Microsoft’s proposed $40 billion acquisition of Yahoo, which contends it’s worth even more money despite a two-year earnings slump.

If the deal eventually gets completed as most analysts anticipate, combining Microsoft’s online services with Yahoo’s sprawling Internet franchise is expected to be a complicated and painful process that will probably involve significant layoffs.

In contrast, Tellme was so small that its payroll has expanded slightly since the Microsoft acquisition, to 360 employees.

But Tellme’s experience as a Microsoft subsidiary so far indicates the Redmond, Wash.-based company’s pledge to preserve Yahoo’s brand, spirit and Silicon Valley presence may not be an empty promise.

Tellme’s warehouse-like office located along some railroad tracks about six miles north of Yahoo’s Sunnyvale headquarters looks pretty much like it did during a visit seven years ago. Some workers dart down the aisles on scooters and patio-style umbrellas loom over desks made out of doors bought from Home Depot.

“We were a little skeptical when Microsoft first bought us, but they really do seem to value our talent and the DNA our of our company,” said Sarah Caplener, a Tellme employee since she got out of college seven years ago.

Caplener and other employees aren’t thrilled with the added layers of bureaucracy that the Microsoft ownership has wrought. There are also regular trips to Redmond, Wash., a journey some would rather not have to make.

But Microsoft’s executives sometimes make it easier by coming to Tellme. Microsoft Chairman Bill Gates even paid a visit last August and spent several hours swapping ideas with the Tellme engineers responsible for programming a system that provided voice-automated responses to about 2 billion phone calls last year.

The Gates session is just one example why Tellme employees believe they are helping Microsoft develop technology that’s more elegantly designed and easier for customers to use, said Peter Monaco, Tellme’s director of application engineering. “We feel like we are having as much of an influence on Microsoft as they are having on us.”

McCue’s background made it seem unlikely that Tellme would ever end up being sold to Microsoft.

Before starting the company in 1999, McCue struck it rich as a vice president of technology for Netscape Communications, the Web browser pioneer that helped open up the Internet to the masses.

Netscape fell on hard times, though, after Microsoft began bundling its Web browser into its ubiquitous Windows operating system, relying on tactics that a federal judge later determined were illegal.

The U.S. Justice Department’s case against Microsoft was driven in large part by complaints from Netscape and other Silicon Valley companies that contended the software maker had abused its monopoly power to compensate for a lack of innovation.

But McCue said he got over any hard feelings long ago as he got to know more Microsoft engineers and even hired some of them to work at Tellme before he sold the company.

Even former Netscape CEO Jim Barksdale says he doesn’t hold any grudges against Microsoft. As an early investor in Tellme, Barksdale said he was thrilled when McCue told him about Tellme’s sale to his old nemesis.

“I am one of Microsoft’s biggest fans,” Barksdale said. “They are a wonderful company and their cash looked good to me. Every deal is different, but this one was great for Tellme.”

Microsoft so far hasn’t been able to lure Yang, who is also Yahoo’s chief executive, to the negotiating table.

If Yang doesn’t come around, Microsoft has indicated it will try to oust him and Yahoo’s other nine board members in a hostile takeover attempt. Microsoft has until March 14 to nominate an alternate slate of directors.

Like many other Silicon Valley observers, McCue expects Yang to sit down with Ballmer before then, unless Yahoo is successful in its efforts to line up a better deal.

“A really great entrepreneur ultimately has to follow the best path forward for the employees, shareholders and the vision that you are pursuing,” McCue said. “I am pretty confident those three things will be on Jerry’s mind when he finally makes his decision.”

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Monday, March 03, 2008

Microsoft-Yahoo combo could mean one fewer exit for upstarts | Tech news blog – CNET News.com

“But if Microsoft and Yahoo join forces, as many suspect they will, that means there’s one fewer buyer of start-ups or midsize companies ideal for acquisition. That’s at least the buzz among some venture capitalists and angel investors during a relatively quiet time in the merger talks.
‘I’d prefer a healthy Microsoft and a healthy Yahoo again competing against Google because it keeps a more vibrant acquisition market,’ said Geoff Yang, a general partner at Redpoint Ventures, a backer of companies such as Wiki company JotSpot (bought by Google), Right Media (bought by Yahoo) and Sidekick maker Danger (being bought by Microsoft).
As everyone analyzes whether a Microsoft-Yahoo merger makes sense, behind the scenes, investors and start-ups are questioning how the landscape may change without one of Silicon Valley’s regular acquirers and a potentially more distracted duo. (In the last six months, for example, Yahoo has bought three companies backed by Redpoint, according to Yang.) Yahoo, Google, and Microsoft–and to a broader extent, Viacom, News Corp., Liberty Media, and InterActiveCorp–buy a handful of companies annually as a way to stay on top of the latest technology trends and bring on new talent.”

Just look at their track records.

Since September 2001, Google has bought an estimated 60 companies ranging in price from $500,000 to $3.1 billion. (Wikipedia has recorded 51 Google acquisitions and investments in that time, but a few companies undoubtedly didn’t make the list, given the search giant’s low-key acquisition strategy.) In the last seven years, Google has bought an average of just fewer than nine companies annually.
Google’s tried-and-true acquisition strategy is to buy young companies with a good idea and talented engineers. Only five of those Google acquisitions were for more than $100 million, including last year’s whopping $3.1 billion DoubleClick deal, which is still pending. The meatier deals, from older to most recent, were Applied Semantics ($100 million), DMarc Broadcasting ($102 million), YouTube ($1.65 billion), FeedBurner ($100 million), and Postini ($625 million).
In the last 10 years, Yahoo has acquired an estimated 57 companies, according to records kept on Wikipedia, but that number is likely lower than the total too. Yahoo’s acquisition price tags have typically been higher than Google’s, with roughly 15 buyouts at more than $100 million.
One of its largest was $5.04 billion for Broadcast.com at the height of the dot-com bubble. The Internet company typically buys several small companies, along with a few larger acquisitions annually. Other notables include Overture Services in 2003 ($1.63 billion) and Delicious in 2005 (unknown sum).
In the last 12 years, Microsoft has bought more than 100 companies, according to Wikipedia records. That number could be higher, but at that rate, its annual average is comparable to Google’s. Over that time, Microsoft hasn’t focused on buying small Silicon Valley companies–last year, for example, it was noted for buying ad agency Aquantive for $6 billion and wireless-phone service Tellme for an estimated $750 million. But it seems to be shifting that strategy of late.
This year, three of its four acquisitions have been private companies from Silicon Valley, including two virtualization software makers, Calista Technologies and Caligari, along with Palo Alto-based Danger, creator of the T-Mobile Sidekick.


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