Friday, May 04, 2007

Microsoft in Pursuit of Yahoo?

Microsoft is said to be in pursuit of Yahoo to bolster its MSN business in response to threats from Google. However, it is not clear is as to how it will this help Microsoft / MSN. Here are some reasons I could think as to why Microsoft would want to buy Yahoo..
  1. Customer base / Traffic: This seems to be most plausible reason. Yahoo attracts more traffic than MSN and Microsoft might want to buy that. But then assimilating overlapping set of customer base very different technologies would be a very challenging task.
  2. Search Technology: Microsoft has been pouring millions to enhance its search engine capability and might be looking at Yahoo to better its search technology. After all, Yahoo is doing better than MSN today in terms of search capabilities.
  3. Middleware Synergy: This is least likely. Microsoft and Yahoo are on two very different technologies (Windows Vs Linux / BSD) and it would be very challenging task to switch the OS and middleware. Even assuming it is doable, what would be the business case for it?
One thing is clear though, Microsoft is having an identify crisis and is trying to figure things out. It started out as an OS company and branched out in to Office suite and Portal business. With the advent of software as service, OS and thick clients are becoming a relic of the past and in a way Microsoft is forced to reinvent itself. Not very long ago, it tried to buy SAP hoping to dominate the application software business and when that failed, Microsoft took software as service seriously and Yahoo might be helping in that journey.

Regardless of what happens to this deal, software industry is in for some big changes and customers are in for some beneficial but exciting ride