Yahoo Pushes and Microsoft Shoves Back

Over this past weekend, Microsoft got serious about escalating its efforts to carry out a hostile takeover of Yahoo, with Microsoft CEO Steve Ballmer formally notifying Yahoo's board it had three weeks to accept his company bid.

Well, based on numerous reports swirling around yesterday and this morning, Yahoo is getting pretty hostile itself. Yesterday, in a clear case of Yahoo adopting the philosophy of "the enemy of my enemy is my friend," Yahoo agreed to work with Google on a test program that will let Google's search advertising service deliver ads by using related searches on Yahoo's Web site.

In concert with that report was another one this morning in The Wall Street Journal that said talks between Yahoo and the AOL unit of Time Warner, first reported weeks ago, are heating up again. (Good Lord, will Time Warner ever learn its lesson about buying large, Web-based companies?) Yahoo is making it painfully clear that it doesn't want to be taken over.

Apparently, though, these moves are only serving to harden Redmond's resolve. The New York Times this morning reports that News Corp., owned by the loveable Rupert Murdoch, has contacted Microsoft about joining up to help pound the Yahoo deal through. I guess the idea here is to bring together all of Yahoo's online products and services with those of MSN and the estimable Mr. Murdoch's MySpace, creating a juggernaut that rules the world of the Web.

I have to admit, I don't really get why Microsoft, News Corp. and, of all companies, AOL want this deal to happen so badly. It doesn't seem worth the trouble. First, all those online products and services from the three companies thrown together and living under the same roof will certainly draw the attention of the Department of Justice. You would think Microsoft has had enough of that over the past 14 years. (Ironically, Microsoft's legal counsel has already indicated it believes any Google and Yahoo relationship would prove monopolistic in the search market.)

Second, would all the corporate cultures fit together well? My guess is probably not, especially with Yahoo dragged into this deal as an unwilling partner. I mean, what sort of cooperative and productive partner would the company prove to be?

Third, does anyone really know how all these products and services from the three companies would work together so that 2 + 2 + 2 adds up to 6 and not 3?

Fourth, will this be enough to slow down the tremendous momentum Google has had over the last several years? I, for one, don't think so. By the time the three companies integrate all of these products, Google will have evolved its strategy to the next phase.

On top of all this, can Microsoft afford the distraction this proposed deal is causing? The company needs to focus all of its time and energy on fixing things like Vista -- or, better, spending some of that $6 billion on research to produce better search products itself. Microsoft should be thinking more about how to innovate its way out this situation and not buying its way out.

Google's Apps Engine Stumbles Out of the Blocks
Just as I was sitting down to write how Google was about to pick a fight with a new competitor -- namely Amazon.com -- by pushing out a beta of its Google Apps Engine (GAE), it appears another (rather unexpected) Google competitor has popped up. 37signals LLC claims that Google has simply lifted its Campfire chat application feature-for-feature and put it smack-dab in the middle of GAE under the name of HuddleChat.

There must be something to 37signals' claims because Google immediately pulled one of GAE's demos involving the offending chat application. Company officials didn't exactly admit any wrongdoing, and only said in a number of other published reports that they decided to remove the application because of numerous complaints.

Yikes. Not a great start. No word yet on when Google might come back with a reworked or completely new application.

Now, where was I? Oh, yes, Google vs. Amazon. GAE's raison d'etre is to provide an online development environment not just for running Web-based apps, but for creating them, as well. Google is clearly trying to push Amazon's Web-based pay-as-you-go set of services -- which has been getting some favorable reviews from users -- out of the limelight. Google also suspects there are a lot of future dollars to be had in this market.

While the Amazon product is perhaps more of a direct competitor to GAE (well, except that Google's product is part and parcel of a platform and Amazon's isn't), the product will also be thrown into the shark tank with Salesforce.com's Force.com, which has some pretty sharp teeth of its own.

Microsoft (Finally) Reaches Out For Some Help
Perhaps the most encouraging thing to come out of this week's RSA Conference was the admission by Craig Mundie, Microsoft's chief research and strategy officer, that his company can't single-handedly build the next generation of secure computer systems. Instead, he made a plea to other developers to "begin a dialogue" that might determine the best way start working cooperatively with other developers and users to accomplish this.

This raises a disturbing question: Did Microsoft ever seriously believe it could do this all by itself? Well, for one, John Thompson, the CEO of archrival Symantec who also spoke at the conference, wouldn't hesitate to tell you that Microsoft was hoping it could pull that off. Thompson has criticized Microsoft long and loud for working against, instead of with, its business partners in the extremely critical area of security.

But, hey, no need to focus on the negative this week. Microsoft is admitting that it's human and is at least acting humbly, so let's roll with that.

Mundie's idea for getting this dialogue rolling is centered on the idea of "end-to-end trust," which he believes is an effective way of getting at unresolved questions surrounding issues like authentication and authorization. He contended that an "integrated" approach to building systems that establish trust, as well as privacy, is the best way to go.

The more important issue involving trust here is whether the industry can trust Microsoft to continue on its path toward the light by reaching out for help on this critical issue -- instead of veering back into the dark by continuing to shoulder this responsibility by itself.

About the Author

Ed Scannell is the editor of Redmond magazine.

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