February 22nd, 2008
Microhoo: Lots of questions and still no new answers
In an e-mail sent to Microsoft employees on February 22, Microsoft Platforms & Services President Kevin Johnson reiterated to Microsoft’s employees why Microsoft is continuing to pursue its goal of buying Yahoo.
The e-mail was not triggered by any new developments, a Microsoft spokeswoman said. It was simply “part of normal communication to employees,” she said.
In his note, Johnson didn’t say anything that he and other Microsoft brass haven’t said before since Microsoft made its proposal to the Yahoo board to acquire Yahoo on January 31.
This week, Johnson told employees, according to the e-mail which Microsoft published on its Web site, that a Microsoft-Yahoo combo will create more competition in search and advertising, which is something major media companies want.
“Without this, there’s less innovation, less competition, and less value being generated for consumers, advertisers, and publishers,” Johnson asserted.
He also said the combined R&D capacity would allow for new innovation in search, video, mobile, commerce and social media. The “scale economics” resulting from combining search and non-search advertising inventory on a single ad platform — which one (Microsoft’s adCenter or Yahoo’s Panama, he didn’t spell out) — would be good for advertisers and publishers, Johnson said.
For consumers and developers, our expanded R&D capacity would allow us to drive innovation in emerging user experiences in areas such as search, video, mobile, commerce, and social media. Already, our collaborative work with Yahoo! on interoperability between our instant messaging services has benefitted consumers and made it easier for them to stay connected with friends and family.
Johnson claimed there are benefits for shareholders, too: “There are expected operating efficiencies driven by synergies from eliminating redundant operating expenses, redundant capital expenses, and ensuring appropriate headcount allocation by function,” he wrote.
Johnson didn’t answer definitely whether there would be layoffs as a result of Microsoft’s acquisition of Yahoo. He said there was “no shortage of business and technical opportunities” at Microsoft, but acknowledged there would be “some overlap” as there would be in any merger of this size.
“While some overlap is expected in any combination of this size, we should remember that Microsoft is a growth company that has hired over 20,000 people since 2005, and we would look to place talented employees throughout the company as a whole…. There’s no question we will dedicate significant rewards and compensation to Yahoo! and Microsoft employees,” he wrote.
Johnson downplayed the cultural differences between Microsoft and Yahoo. He claimed Microsoft’s “culture of innovation and long-term commitment to tough R&D problems” would blend well with “Yahoo!’s blend of Web-centric DNA and innovative engineering, 21st century media expertise, and advertising talent.” He said Microsoft would maintain locations in both Silicon Valley and Redmond but would be committed to maintaining Yahoo’s “significant presence” in Silicon Valley.
Johnson played up the value of the Yahoo brand, but said it would be “premature” to say which aspects of the (Microsoft and Yahoo) brands and technologies would be used in the companies’ combined offerings. So will Microsoft keep its Live and MSN brands, alongside the Yahoo ones? No definitive word from Johnson.
Johnson also declined to say definitively whether Microsoft would replace Yahoo’s open-source-based infrastructure with Windows-based servers and datacenters.
“Although Windows is our strategic platform and in some cases the teams ultimately migrated their products to Windows for a variety of reasons,” Johnson wrote, “in other cases we have prioritized continuity and have used open interoperability mechanisms to achieve effective systems integration. ”
Bottom line: Johnson says it’s business as usual and full-speed-ahead until the time if and when Microsoft is able to complete its hostile takeover of Yahoo. The Yahoo board, meanwhile, is now fending off a second lawsuit — this one from a couple of Detroit pension funds — for allegedly destroying shareholder value by continued inaction on Microsoft’s acquisition offer.
The Microhoo soap opera will continue next week… Stay tuned.
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