Look-I’m a Microsoft fan. As a company, they’ve developed an incredible amount of software. And, as a collection of individuals, you won’t find a smarter group anywhere: just read some of the MSDN blogs. I’m in Mensa and I feel like a moron after reading the daily postings. Several times in my career, I’ve been fortunate enough to work on a team made up of smart, hard-working, ambitious, and fun-loving people. That experience is the most addictive drug I know, and that’s why I admire Microsoft as a company and as a collection of employees.
You think Microsoft is the Evil Empire? Grow up, get a clue, and go back to your open-source playware: it’s a company with a large proportion of driven, ambitious people committed to the fact that if version 1.0 of product “x” isn’t the greatest, version 2.0 or 3.0 or 4.0 will be the greatest. Microsoft won’t give up, and that attitude (call it their “Flight 93 syndrome”, and I use that phrase with the deepest respect) is a part of the Company’s culture. So, I’m not piling on with the bash-Redmond crowd.
But I’m confused about this Yahoo deal. It’s expensive now and it’s likely to get more expensive when YHOO’s board rejects the deal, as they’re likely to do on principle and as a negotiating counter-move. The rate of return on the merger ain’t great, and the calculations offered by MSFT fail to consider one-time costs. MSFT’s stock price has been unimpressive for several years and it’s taken another hit with this announcement. Can somebody explain to me why this deal is good for me, an infinitesimally small MST stockholder?
My conclusion is that this bid is plain crazy-maybe a desperate attempt to catch up to GOOG. But Microsoft, with its building full of antitrust lawyers, must have a damn good idea that the competitive effect of this acquisition will generate worldwide, and generally unfavorable, attention. For crying out loud-the E.U. does nothing except snipe at Microsoft, thinking that hobbling MSFT will somehow make European business more competitive. Well, I have news: there’s nothing stopping anybody from inventing the Next Great Thing, with or without Microsoft in the market. Example #1: Google.
My corollary conclusion is that MSFT is making a tactical move, possibly to turn the E.U.’s lights on Google’s market position. MSFT might gain if GOOG is reined in: the question to the E.U. is why GOOG, with such a commanding market share, operates freely while MSFT operates under a regulatory microscope.
My advice to MSFT is to focus on developing software and buying back stock. Spin off the weird businesses. Develop killer apps that support on-line advertising. Get lean and rich again. Let’s get that P/E ration moving up again and boost the dividend. Incubate, incubate, incubate, bring the winners into the fold, and dump the losers wherever they are. If you’re lucky, you’ll be able to dump the losers before the Board accepts the offer.
