Who's Next?

Now that Microsoft has given up on a recalcitrant Yahoo, it's time to ponder who will be next in the Microsoft acquisition sights. Several stories on RedmondReport.com -- such as this one from CNN -- provide some speculations or advice on what Microsoft should do now.

I'd like to think I'm honest enough to admit that I have no clue what path Microsoft should follow. Having had a front-row seat at several mergers only to see them fail, I had my doubts as to the proposed acquisition. But sometimes, when you can't catch up to the market leader no matter how much money you throw at the problem, you have to acquire the technology to leapfrog your own internal efforts. But that only works if you know how to use the technology you've bought.

So what do you think Microsoft should do now? Give me your thoughts at pvarhol@redmondmag.com.

Amazon Sues New York Over Taxes
The ongoing battle between Internet sellers and state revenue coffers was jacked up a notch recently with a lawsuit filed by Amazon.com against the state of New York.

This suit is in response to a recently passed New York law that requires a retailer with an agent in the state to collect sales tax from buyers in that state. Most states' laws require a physical retail presence in the state to require the retailer to collect sales tax.

In this case, New York has specifically written the law to include affiliated agents of Amazon, those who have links to Amazon on their own Web site, and receive a few cents for referrals. There are thousands of such agents across the country (I was one in a previous role, simply because my Web portal included links to Amazon), making it virtually impossible for Amazon to avoid becoming a tax collector.

I appreciate the need for governments to respond to the lost tax revenue caused by Internet retailing. However, actions such as this simply represent old and stale thinking on the part of those governments. They still have to deliver essential services to their citizens, but is this the best they can do?

What's your call on Amazon affiliates and New York? I hear you loud and clear at pvarhol@redmondmag.com.

Sun Microsystems Deals with Loss, Layoffs
I don't normally write about a company's financial results because they bear little on the technology, but the continued deterioration at Sun Microsystems begs to be mentioned because it says something about technology trends. The company's latest quarterly figures show a $34 million loss on sales that were down slightly from a year ago.

During the dotcom boom, Sun positioned itself as the irreplaceable dot. Its proprietary architectures offered outstanding performance and reliability, and few cared that they had to pay a hefty price for those characteristics.

After the dotcom bust, the market for SPARC servers went south so fast that the company laid off tens of thousands of workers (I think the final number was around 40,000), and built a new hardware business -- selling x86 servers. Currently, the typically low-margin x86 systems make up half of the company's server shipments. After a long (three-year) period of losses, it had five consecutive quarters of profit, only to blindside industry watchers with the latest quarter results.

What do you think? Brief hiccup or technology roadkill? Tell me at pvarhol@redmondmag.com.

Mailbag: Life After Yahoo
Doug wrote yesterday about the failed Microsoft-Yahoo deal, saying that Microsoft didn't need Yahoo anyway -- and certainly not at $48 billion. Most of you agreed:

I can't tell you where you are wrong, because you are absolutely right.
-Bryan

"To invent the future, not to buy the past." You should copyright that. Though as you have pointed out many times, Microsoft is not very inventive.
-Bill

I couldn't agree more with your assessment. I believe that Microsoft needs to invest that $48 billion and expand the technology forefront to surpass Google. There is definitely sufficient intellectual capital there and with Ray Ozzie as chief architect, they are more than capable of pushing the envelope. Definitely a better ROI!
-Todd

Thank the Lord for miracles. Steve Ballmer and company can easily out-build anything Yahoo can do and probably make more money doing it. I hope that this will once and for all make Microsoft understand that you can't always buy what you want; sometimes you just might find you have what you need (to paraphrase a classic Stones tune).
-Tim

I happen to agree with you. Should Microsoft buy that dog Yahoo, I personally would pay no more than $25 to $30 billion. Yahoo might -- and it's only a might -- add to Live Search, which I use exclusively. Live Search does everything for me that either Google or Yahoo can. Ask.com might be a much better fit and could probably be bought for $12 to $15 billion. It has a reasonable amount of search capabilities and would complement Live Search quite well. Microsoft can and should expand Live Search. I firmly believe it is quite a viable alternative to Google.

Now, what Ballmer is going to do -- and if he gets reigned in by Bill Gates, a real possibility and one that Gates should consider -- is the real question. As a stakeholder in Microsoft, I have e-mailed Ballmer, Gates and the rest of the board expressing my disinterest in the acquisition of Yahoo. I've also let them know my disgust. It's just not worth the money. The only thing worth anything would be the development team at Yahoo. They would be an excellent addition to Microsoft's present development team. Other than those people, and if they stayed and worked for Microsoft, Yahoo is worth less than nothing. I would not by Yahoo. In fact, I wouldn't touch that company with a 10-foot pole.

-Joe

I agree with you that the money is better spent on inventing the future but you didn't address the value that Microsoft placed on all the traffic that Yahoo commands. That was the true value that Ballmer coveted.
-Peter

Microsoft wouldn't have increased its offer to $48 billion unless it thought it would swing things its way. When Yahoo said "No," I think Microsoft realized it would either lose its case or else spend so much to win that it would lose money in the process.

As far as Microsoft using its billions to invent the future, I think it should give us software that is not full of holes and something we want, instead of trying to shove Vista down our throats. Nobody that I know wanted it and my cousin has had nothing but problems with it. If you needed another car but the only one that was available was worse than the one you had, would you change?
-Les

Unless Bill Gates is still the man behind Microsoft and he closed the door on this deal, Microsoft and Steve Ballmer will have a hard enough time in keeping up with the present. Steve is not as clairvoyant as Bill is. Steve gave up on Yahoo. Bill Gates would have cordially received Yahoo and found a futuristic and/or emerging technology to create a win-win for both companies. Can you say "Zune II" or "Yahoo for robotics and/or immersion"? Maybe even "Yahoo Box" because Xbox is becoming old technology already. If any of these ideas become reality, I want residuals from their success!
-Tom

Tell us what you think! Leave a comment below or send an e-mail to pvarhol@redmondmag.com.

About the Author

Peter Varhol is the executive editor, reviews of Redmond magazine and has more than 20 years of experience as a software developer, software product manager and technology writer. He has graduate degrees in computer science and mathematics, and has taught both subjects at the university level.

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