Gates Explains Microsoft's Need for Yahoo

eldavojohn writes "Perhaps it's obvious to you and perhaps you'll be pleasantly surprised by his answer but Gates revealed to CNet why Microsoft needs Yahoo. From his response, "We have a strategy for competing in the search space that Google dominates today, that we'll pursue that we had before we made the Yahoo offer, and that we can pursue without that. It involves breakthrough engineering. We think that the combination with Yahoo would accelerate things in a very exciting way, because they do have great engineers, they have done a lot of great work. So, if you combine their work and our work, the speed at which you can innovate and get things done is just dramatically more rapid. So, it's really about the people there that want to join in and create a better search, better portal for a very broad set of customers. That's the vision that's behind saying, hey, wouldn't this be a great combination.""

Re:Why not save $40 billion then?

[sw155kn1f3]

It is funny though that MS itself started this way and B Gates knows about this, maybe even better than anybody in the industry, yet we've being seen MS to become big bureaucratic enterprise that can't really innovate no more. Their XP success is pretty much logically follows from NT4, and NT4 was still being developed by VMS hacker guys, old-type, so MS windows department just added bells and whistles and created new OS.
What modern day MS Windows department itself can produce we've seen few times already (ME and Vista).
So far MS is turning into big behemoth that can serve only niche customers (like IBM LotusNotes, Sun etc). Maybe it's just logical development of any enterprise, when the very first head forgets that he didnt quite started the enterprise to make money or please shareholders.
And throwing money on the problem does nothing.

Re:Um, didn't Gates quit?

[imadork]

billg is still chairman of the board.

Re:Gates Explain's Microsoft's Need for Yahoo

[sm62704]

Is that grammar or spulling? But at any rate he needs to meet Bob [angryflower.com]. Sadly, so do a lot of other slashdotters.

Re:Why not save $40 billion then?

[hrieke]

Because in California, Non-Competes [typepad.com] have no legal value.

That said, I agree 100% with the notion that this is MS' Waterloo. They have effectively stated that they can not, even with owning the OS and web browser, use people's web habits and make money from that.

Perhaps a bunch of Silicon Valley types should buy some MS shares and start a proxy war over where MS is headed (demand that MS pay out their war chest for example)?

Just a RND thought.

Re:No Zimbra???

[Anonymous Coward]

What the fuck is Zimbra?

Re:Um, didn't Gates quit?

[SEMW]

I seem to recall that he stated he was retiring. And back in 2000, didn't he quit then, as well?

Prior to 2000, BG was CEO and chairman of the board. In 2000, he quit as CEO, and took up a job as Chief Software Architect. Later this year, he will quit that job, so will no longer be employed by Microsoft; but will still be chairman of its board.

It's for the warm bodies, not for technology

[Jon Noring]

Bill Gates comment is interesting in that MS' purpose in acquiring Yahoo is primarily for Yahoo's technical people, and not for any particular technologies/IP held by Yahoo. That is, MS values Yahoo only for its technical people. In a sense MS is fighting a war against Google on two fronts: 1) the search engine business, and 2) attracting the sharpest technical people. MS is losing on both fronts. Instead of MS changing its corporate environment so as to again be attractive in recruiting sharp people, MS is simply trying to buy these people from other companies. It's sad really, and reflects the real problem with MS: its employee environment. Who wants to work for MS these days? (Just read Mini-Microsoft's blog for interesting insights into how MS has evolved -- it is a pretty brutal work environment that no longer sufficiently rewards those who excel.) It'd get real interesting if a significant number of Yahoo staff come out and publicly say they will move to other companies (e.g. Google) should MS buy out Yahoo. In fact, Google could get the word out essentially rolling out the red carpet for any Yahoo employee who decides to leave Yahoo should the MS takeover come to pass. Imagine if 1000 of the top Yahoo staff said "we will not work for MS." I can't think of a better "poison pill."

It's not about search

[0WaitState]

Microsoft is unlikely to be so interested in Yahoo for the search capability, though that's a nice side benefit. The real prizes are yahoo webmail and yahoo messenger. Combine those two with hotmail and MSN messenger and you have about 75% of all webmail traffic and about 2/3s of all IM traffic.

Fussing about the combined entity's search percentage is just noise--the real new killer market shares would be in webmail and IM.

Re:Brute force and ignorance

[donweel]

Microsoft does not innovate they acquire, they always have. When IBM approached Bill Gates for an operating system they thought he had, when he only had a basic interpreter, he went out and bought Rdos a CPM clone, and used it to make PCdos. They bought Hot Mail. And here is some more: http://www.microsoft.com/msft/acquisitions/history.mspx [microsoft.com]

Re:Why not save $40 billion then?

[jfbilodeau]

I think that Bill G. and Steve B. are annoyed that MS's shares haven't moved much since 2000. MS is still a safe investment, but their stocks seems stuck and not growing much.

Re:Why not save $40 billion then?

[rrohbeck]

>How many people will change groups because one member says that he cannot access it with Firefox?

Many. Yahoo and Google have been meticulous about platform independence, that's part of what made them successful - as opposed to MSN for example.

I've been a paying Yahoo customer for many years and I'm ready to cancel as soon as the acquisition goes through.

Re:Brute force and ignorance

[Teilo]

There was no real quality of search results when that fight took place. It was a different era, with little more than keyword lookups.

I totally disagree. When Google first appeared on the scene, they had two things that nobody else did. The first was speed. It was jaw-droppingly fast. Nobody was that fast. Not Yahoo. Not Altavista.

Second, was a design decision: That search results would contain every word you typed. No more of this +term nonsense. This made things very simple for users who don't care to learn a search-term language.

The result: happy users.

After that, they hit hard on designing good algorithms, and hired the mathematical talent to do it. Nobody else treated search with so much science. This made users even more happy. Google had the most relevant results.

So - Google won because, from the common end user's perspective, they had a superior product. Period. That plays right into the GP's argument. Superior product = more customers = more ad revenue = the first .com services company to be seriously in the black.

Ballmer is Google obsessed

[EmbeddedJanitor]

Vista cost $5bn, Yahoo could cost $40+bn. That has to say something about where MS's current management priorities lie. They are Google obsessed.

If you're competition focussed, and not customer focussed, then don't expect your business to grow. MS has a lot of momentum, so it won't die overnight.

They've puled the Vista SP1 and that's not getting much of Ballmer's energy. Nope he's off buying Danger and trying for Yahoo to try make a fight with Google.

Google must be pissing themselves. Both Yahoo and MS are sinking in service space and there is no reason to think that they will be more productive together than as they currently are, while Google is growing.