The implications of Microsoft bidding $44.6 billion on Yahoo

All over news outlets over the last two days is the fact that Microsoft has bid $44.6 billion for Yahoo.

The implications of such an acquisition are far reaching.

The timing: Why 2008?

First the timing. Regulators will take a close look at it. But, this is the last year that a Republican is in office for certain, and probably not for the following 4 or 8 years. By having this move before President George W. Bush leaves office, Microsoft has a better chance of it getting approved.

The target: Google

Microsoft has always been lagging when it comes to the internet. Partially due to its desktop centric monopoly and mentality, Microsoft has not been internet friendly, because platform independence is its own dead knell.

It seems the main goal of this acquistion is aimed at Google. Microsoft, by increasing its internet footprint with the longest established internet portal, and the second search engine becomes a Google rival overnight.

But the whole market does not have the same number of players, rather one less in the internet arena.

The technology: impact on Open Source

On the technology side. Microsoft bought Hotmail that was running a UNIX variant: FreeBSD. They converted to Windows and had a rough time with scalability and stability before it finally was able to cope with the load. Yahoo uses FreeBSD heavily, and invests in lots of Open Source, such as PHP (Rasmus Lerdorf works there), and MySQL.

Microsoft will not allow this sort of relation to continue, as Open Source is its nemesis.

All those platforms and applications will definitely be moved to Windows in due time.

In the past, Microsoft offered, and got, to host parked domains for GoDaddy for free on Windows. Now, they will expand their web footprint with Yahoo's sites as well.

Will they end up rewriting all the applications in .NET instead of PHP, IIS instead of Apache, and MS-SQL instead of MySQL? Good luck with that, it will be a typical death march project.

The overlaps: there are many of them

There are too many overlaps between Microsoft and Yahoo. For example, a non-exhaustive list will include:

  • Yahoo Mail vs. Microsoft Live Mail.
  • Yahoo Search vs. MSN Search.
  • Yahoo Messenger vs. MSN Messenger.
  • Yahoo Finance vs. MSN Moneycentral.
  • Yahoo Publisher Network Ads vs. Microsoft AdCenter.

This means that a lot of these areas will see consolidation, by moving customers from the obsolete platform to the one that stays.

There are some areas that do not overlap, such as Flickr, which is a relatively young addition to Yahoo's collection. Things that are purely web based, such as Yahoo Addressbook, Notepad, Calendar and the like.

For users of oen or more of the above online services, myself included, this poses a dilemma: whether to keep the data there or move it to Google away from Microsoft, thus strengthening Google's grasp on personal information, and making it grow more into the evil company that it dreads to be.

The missing player: Apple

Missing from all this is the Apple factor. None of this has an impact on Apple, other than making it harder for Safari to access Yahoo web properties and online services. They can't lock them out blatantly, but they can make it harder for them: a marginalized or a pariah.

But, this merger can be a silver lining for Apple. Now that Microsoft/Yahoo has its sight set on Google, they may ignore Apple for a while, and be distracted by the mess they brought in to themselves trying to merge both companies.

This may buy Apple enough time to grow and be a more serious contender across the board for Microsoft.

The layoffs: they are inevitable

Not only will the damage be in eliminating open source technology in favor of Microsoft's in house Windows, .NET, IIS, and MS-SQL, but there are other ramifications.

A merger of that size will no doubt result in massive layoffs. Microsoft has said that "eliminating redundant infrastructure and duplicative operating costs
will improve the financial performance of the combined entity".

This definitely means eliminating one or the other of the above overlaps.

Microsoft goes on to temper this by saying they will "offer significant retention packages to your engineers, key leaders and employees". Which means a lot of non-key people will be let go, and there is no guarantee that the key ones will be enticed to stay, making this merger risky.

Worst case scenario and competition

Microsoft would be spending all of its cash reserve to buy Yahoo, which is a significant gamble. It better works out for them, or they will suffer severely.

Could it be that the giant python eating an alligator only to explode and both of them die?

While it is good to have Microsoft mellow down and play nice, having a landscape without Microsoft Yahoo is not a good thing. Apple and Google will become more monopolistic because of the lack of competition.

Conclusion

This merger, if it goes through, is bad news for Yahoo, its users, Open Source and the internet at large, no matter what details end up happening.

Less competitors in the market, larger corporations, less open source usage and sponsorship by large companies.

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Comments

For Canadian Rogers customers ...

There are implications for Canadians that use Rogers as their internet service provider (ISP). Yahoo does the email provision for Rogers.

If Microsoft does buy Yahoo, then it is already partners with the largest ISPs in Canada, Sympatico (by Bell) being the other one that has an MSN partnership.

See this article from The Record for more details.
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Khalid Baheyeldin