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Yahoo Bid shows Microsoft on the Ropes
Posted by
CmdrTaco
on Sat Feb 02, 2008 10:28 AM
from the i'm-available-for-one-percent-of-that-offer dept.
from the i'm-available-for-one-percent-of-that-offer dept.
Ponca City, We Love You writes "One day after the announcement of Microsoft's plan to buy Yahoo, there is an interesting piece from the NY Times analyzing the reasons behind Microsoft's bid and proposing that the bid is a tacit, and difficult, admission that Microsoft did not get its online business right and that online losses continue to mount while Google makes billions in profit. Microsoft "finds itself in a battle where improving its search algorithms and online ad software is not going to be enough," writes the Times. With the Yahoo bid Microsoft is trying to buy a big enough share of the market to be a credible alternative to Google with online advertisers. "This shows just how worried Microsoft is by Google," says David B. Yoffie. "Microsoft has faced competitive threats before, but none with the size, strength, profitability and momentum of Google.""
Related Stories
[+]
Yahoo Deal Is Big, but Is It the Next Big Thing? 159 comments
mattsgotredhair brings us a NYTimes article discussing how Microsoft's bid for Yahoo contrasts against one of the core philosophies of Silicon Valley: looking forward. From the Times:
"Microsoft may see Yahoo as its last best chance to catch up. But for all its size and ambition, the bid has not been greeted with enthusiasm. That may be because Silicon Valley favors bottom-up innovation instead of growth by acquisition. The region's investment money and brain power are tuned to start-ups that can anticipate the next big thing rather than chase the last one. 'This is the very nature of the Valley,' said Jim Breyer of the venture capital firm Accel Partners. 'After very strong growth, businesses by definition start to slow as competition increases and young creative start-ups begin to attack the incumbents.'"
[+]
Technology: Yahoo May Re-Consider Google Alliance, Rebuff Microsoft 273 comments
anastasd writes "Reuters is reporting that Yahoo might consider a business alliance with Google as a way to top a $44.6 billion takeover proposal by Microsoft. 'Yahoo management is considering revisiting talks it held with Google several months ago on an alliance as an alternative to Microsoft's bid, that source said. At $31 a share, Yahoo believes the bid undervalues the company, two sources said. A second source close to Yahoo said it had received a procession of preliminary contacts by media, technology, telephone and financial companies. But the source said they were unaware whether any alternative bid was in the offing.'"
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Eh? (Score:5, Insightful)
Re:Eh? (Score:5, Insightful)
Here, let me fix that for you ...
At least they're not offering to pay in Bush coins [blip.tv] ... yet!
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Microsoft: More money than brains. (Score:4, Insightful)
Not only does the high price show Microsoft's desperation, it indicates that the real lack at Microsoft is not money, but brains. Yahoo is only a web site. The fact that Microsoft has not been able to compete shows the serious mental poverty that is a common symptom of those who have put money first in their lives. (Bush and Cheney are other examples, as the video shows.)
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Don't be surprised if the deal falls through ... (Score:3, Interesting)
The deal is still below what Yahoo! was worth a year ago ($47 billion), and also, with Friday's rise, not much of a premium http://finance.yahoo.com/q?s=YHOO [yahoo.com]
Now add in that Microsoft is only offering $21 billion in cash, and the rest in stock, and that's no longer much of a premium for buying out the whole business.
Yahoo! could also do a "poison pill" - buy Redhat. There's no way that Microsoft would be allowed to buy Yahoo! under such circumstances.
Re:Don't be surprised if the deal falls through .. (Score:4, Funny)
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Re:Eh? (Score:4, Funny)
So you expect Microsoft's web browser to take out the loan?
Ask the grammar police: it's "i.e.," not "IE."
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Re:Eh? (Score:5, Interesting)
People aren't buying Windows Vista and Office 2007 because they have Windows XP and Office 2003 that does the job just fine, and possibly better, and it costs nothing to continue using it. None of their other attempts to diversify - Zune, X Box, Windows Live etc have been very succesful, so there are problems ahead.
They aren't bankrupt yet, but they are taking action to try and avoid it while they still can.
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Re:Eh? (Score:5, Interesting)
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Re:Eh? (Score:5, Funny)
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Re:Eh? (Score:5, Insightful)
They're still pursuing that strategy, and it remains to be seen how well it turns out. They've lost the using-SCO-as-a-front gambit, but they're still fighting on the bludgeon-ISO-into-making-OOXML-a-standard and kill-OLPC-in-favor-of-Windows-running-stuff fronts.
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Re:Eh? (Score:5, Informative)
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Re: (Score:3, Informative)
Re:Eh? (Score:5, Interesting)
Just about everything you said is incorrect. You said:
You said: People aren't buying Windows Vista and Office 2007 because they have Windows XP and Office 2003 that does the job just fine, and possibly better, and it costs nothing to continue using it.
But the facts are: "Better-than-expected worldwide PC shipments, tougher anti-piracy measures and growing numbers of businesses switching to long-term volume software licenses helped boost revenue for the two Microsoft divisions responsible for Windows and Office to a total of $9.14 billion, 50 percent more than a year ago."
Microsoft has never depended on people going out and buying Windows and Office as shrinkwrapped software. People buy them when they buy computers because it is the easiest thing to do.
You said: . None of their other attempts to diversify - Zune, X Box, Windows Live etc have been very succesful, so there are problems ahead.
But the facts are: "The division responsible for the Xbox 360 video game system swung to a profit on rising sales of games and accessories, which deliver better margins than the console itself. Microsoft said the division is still on track to be profitable in fiscal 2008."
You said: They aren't bankrupt yet, but they are taking action to try and avoid it while they still can.
But the facts say: "Microsoft blew by Wall Street's expectations for a second consecutive quarter." (announced just a couple of weeks ago) Quantitatively speaking they are not only "not bankrupt yet" but not even heading in that direction.
My reference: http://www.kval.com/news/business/14266747.html [kval.com]
Do I think that all is well in Microsoft land? No way: but no massively profitable company with a gargantuan bank account can be said to be "on the ropes". There is a big difference with "perhaps pointed in the wrong direction" and "on the ropes". It would be more accurate to say: "There are indications in the early rounds of fighting that the current champ will have to adjust strategy to win against a promising upstart competitor."
I'm no Microsoft fanboy: I think that they need to fire Ballmer and reform the culture. But that's actually an easier thing to do than the sorts of things that their competitors need to do to become as entrenched and powerful as Microsoft is. Or to put it another way: Microsoft will lose if they don't adjust strategy, but the fight is still theirs to lose. i.e. they are a bit bloodied, not "on the ropes".
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Re:Eh? (Score:4, Interesting)
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Re:Eh? (Score:5, Funny)
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Regardless, they both scare the hell out of me. (Score:4, Funny)
With rumors of NSA backdoors into MS operating systems, and Google maintaining search history until the end of time, both of these companies practically have the power on their own to become George Orwell's big brother. If we had any sense as citizens and consumers, there would be a huge rush for the exits (yet here I sit on Windows searching with Google).
I don't like this power over society. Whichever one takes more effective means in demonstrating that their power is benign will have my support. Neither has taken effective measures to prove their goodwill towards consumers as of yet.
Oh, and you can throw in AT&T in that mix, too.
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Re:Eh? _ Madness to their methods (tongue-in-cheek (Score:3, Interesting)
Reprinted from the Bizarro World Times
April 1, 2010
Headline:
BALLMER PLAYS FIDDLE AS MICROSOFT BURNS
Reported by Peter Perplexed and Wally Whathehelljusthappened
Federal investigators with the SEC and FBI, along with Interpol authorities, today released preliminary
I think MS really SHOULD improve that ... (Score:5, Insightful)
search algorithm ... it would certainly help make the "service" an actual service! Over the years I've watched as Microsoft has released meh product after meh product. Isn't that their real problem - when the vendor lock-in wears off, they have DAMN weak products.
I have never understood the popularity of Windows with consumers (beyond the obvious monopoly power they wield with personal computer manufacturers), I find their software mostly blech (frankly, anything NOT Word and Excel is just junk) and their online products and services NEVER work as advertised. NEVER.
If I were Microsoft, I'd try and refocus the company culture and align it with the interests of its customers and not ... well ... whatever hellish alliance of businessmen, content producers and bean counters they're currently serving.
I think the XBox 360 points the way, really ...
Re: (Score:3, Insightful)
Re:I think MS really SHOULD improve that ... (Score:5, Insightful)
This isn't about the search algorithm. Microsoft is clearly after Yahoo's user base and users that go to Yahoo for search. For what it's worth, they could scrap Yahoo's search algorithm completely, replace it with MSN, as long as they believe that users will still go to Yahoo after that.
Of course, Microsoft has done that before. Look at Hotmail for instance. They couldn't stand the fact that it was not Microsoft technology under it, so they just had to "improve" it on their way. Results? After Microsoft's "improvement" Hotmail ceased to be #1 in webmail and now must be around #957 in market share.
It's probable that if they finally buy Yahoo it will be just the same. Users will deflect in masses. First it will be the users that leave Yahoo because they don't trust Microsoft (say around 5-10%), then it will be the users that leave Yahoo because Microsoft "improves" the service with their own ways of "improvement" (say around 10-20%), and finally it will be the users that leave Yahoo because Microsoft will introduce its silly single platform locked-in technologies, like Silverlight, and they will try to integrate Yahoo with the desktop, which will make Yahoo no longer as "convenient" it is from the point of view that you can access it anywhere without restrictions (say around 20-40% users leaving because of this).
In the end, Yahoocrosoft will lose from 35% to 70% users, and Google will be a yet bigger #1 with a distant #2. I think Microsoft buying Yahoo will be bad for the search/ads market, but it will be good for the OS/desktop/browser market, because Microsoft will certainly weaken from this. I think it's worth to give Google that much power if we get rid of Microsoft in the process, so I'm happy with this and I actually want it to happen, as much sorry I am for Yahoo, but hey, if they take the bid, they're just asking for it.
Yes! Exactly my point. If Microsoft tries to think "as Yahoo does" and doesn't intervene that much, it could use its money and power to actually make it grow and defy Google. But Microsoft is too clever! They'll want to turn Yahoo in Microsoft, they'll want to use their MSN knowledge to grow Yahoo. They'll want to "improve" Yahoo services by migrating them to Windows servers (as with Hotmail), they'll want to "leverage" the desktop on Yahoo services. That will be their biggest mistake. But it's inevitable, there's no way that Microsoft will buy Yahoo and not do that.
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With a recession, ad buys with #2 get cut. (Score:5, Insightful)
And in a recession, advertisers scale back their ad buys. Instead of buying in the top 2 in any market, they buy from #1 only. Even Microsoft admits that Google is #1.
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Re:I think MS really SHOULD improve that ... (Score:5, Informative)
Microsoft has tried several directions when it comes to break into new markets but let's face it, they haven't done a very good job of it. Their money comes from the Server and Tools Division and the Business Division (Office etc.). And I don't think it's going to change... perhaps because they aren't used to competing on merits alone.
2004 10-K (has the 2002 to 2004 numbers) http://www.sec.gov/Archives/edgar/data/789019/000119312504150689/d10k.htm [sec.gov] 2007 10-K (has the 2005 to 2007 numbers) http://investing.businessweek.com/research/stocks/financials/drawFiling.asp?docKey=136-000119312507170817-22AR89VDNH3I307BANT6DSD928&docFormat=HTM&formType=10-K [businessweek.com]
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MS buys Yahoo so Live can compete with Google? (Score:5, Insightful)
Evidence that Live search will never dominate in mindshare:
"I Lived for my old highschool classmates." Huh?
"Just Live my resume." Ok.
"You guys just sit around in your mom's basement Living for pr0n." And?
If people are using Live to google shit, they've lost.
(Captcha is 'hopeless'.)
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The bid is public ... so (Score:5, Insightful)
I think the public nature of the bid suggests that private behind-closed doors negotiations have failed and they're trying to attempt a near-hostile takeover. YHOO [yahoo.com] shares have jumped about 10 USD over friday and a lot of us have been getting rid of them. And I wonder who's buying all of these, in reality? Someone who'd pay 31 dollars for a share, when they could instead buy it in-market at 28?
I'd really hope it was some sort of last-ditch effort to put shareholder pressure onto Jerry Yang (yes, I do work at Y! and I do have a very nice job [php.net], which I'd be really sad to leave ...). And yeah, read my domain to figure out exactly why I would have to :)
Here's to hoping that it doesn't happen (for YUI, flickr, freebsd, hadoop and del.icio.us!)
Re: (Score:3, Interesting)
More than near-hostile... (Score:5, Interesting)
That sounds like a full-fledged hostile takeover threat to me... "we can do this the easy way, or the hard way."
I think we can all agree that what Microsoft needs most is a complete change of corporate culture, not Yahoo. This would require a complete replacement of at least 80% of the Microsoft brass, however, so it's not likely to happen until the company is near-dead.
However, if Microsoft realizes that they need to change their corporate culture to attract a bigger audience/customer base, but doesn't want to go through the hassle of actually doing it, then theres one VERY EASY way to impart this realization onto the purchase of Yahoo: for the love of fucking god, DONT FUCK WITH YAHOO!! That means: no changing their servers from FOSS to Windows, no firing all of their managers, and no adulterating Yahoo's way of doing things with Microsoft's shittastic attitude (among other things).
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Re:More than near-hostile... (Score:5, Funny)
Unfortunately, at the end of the letter under his signature, Ballmer wrote in ballpoint pen, "Microsoft reserves the right to fuck with Yahoo."
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Re:The bid is public ... so (Score:5, Informative)
To answer your first question, they are called risk arbitrageurs [wikipedia.org]. They essentially buy the stock of the target company and short sell the stock of the acquiring company. They make a profit as the target's stock price appreciates to the offer price and as the acquiror's price decreases because of the costs of the takeover (e.g., cash paid out, dilution in stock value, debt taken on).
Their presence, and the reason Yahoo!'s stock only trades at ~$28 is due to the risk that the deal will not close. Deals have to go through a lot of vetting both by the government (DOJ, FTC) and by the parties making them. There is always a risk that at some point along the way either the government will not approve or one of the parties will get cold feet. This is especially true of hostile takeovers, which this offer is similar too, because the target is by its nature an unwilling participant.
As for why Microsoft is not buying in the open market, the short story is that there are a lot of rules and regulations that would just make it a stupid idea. For example, their are lots of disclosure rules that go into effect as an individual (or corporation's) stake in another company increases. Since Microsoft cannot buy all of Yahoo!'s shares on the open market all at once, it would have to fulfill these requirements and essentially announce to the world that it is acquiring Yahoo! before it has done so. This would probably cause a lot of investors to hold out from selling in an effort to get Microsoft to pay more for their shares. If Microsoft is far enough along in its purchases, it would have to capitulate because the cost of backing out and dumping all of its shares would be too high.
That's where the risk arbitrageurs step into the picture in a funcitonal way. Microsoft essentially announces what it will pay. All of the antsy Yahoo! shareholders sell to the arbitrageurs who then must try to help the deal close so they can make their money. This effectively allows Microsoft to offer $31 a share without incurring any of the hold out risk inherent in trying to buy in the open market.
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Regulators? (Score:4, Informative)
If MS buys Yahoo, the top 5 search engines will becomes the top 4.
Not to mention that many of the 2nd tier search engines are "powered by" Yahoo & MSN
Microsoft failed the minute (Score:5, Insightful)
Whenever you push an agenda different from the client's, the client walks.
They never did that (Score:5, Informative)
They started doing this once IBM gave them an exclusive contract to provide MS-DOS for the original IBM PC. By the time Compaq and co. had their clones ready, MS-DOS was the only game in town. Later, when DR-DOS came around, it started making *serious* inroads. Microsoft then made per-processor deals with the OEMs, making sure a copy of MS-DOS was sold with every processor, whether it *shipped* with the processor or not. This made it economically difficult for the OEMs to sell DR-DOS instead of MS-DOS. (DR-DOS was *far* superior to MS-DOS.)
It's these bundling deals that kept Microsoft at the head of the market all those years. Once they got a significant lead, it became impossible for any other competitor to create a competing product.
Microsoft was helped by some incredibly stupid decisions by other companies, true. (SEE Novell, and their handling of Word Perfect and Novell Office, for instance.) However, it' Microsoft's ability to warp the market to their own ends that has kept them on top, *not* giving the customer what they wanted. (They were so successful at market manipulation, the customer often never knew there *was* an option.)
When there's only one trail, the customer can't walk. That's what monopoly abuse is all about. We don't call it "lock-in" just to amuse ourselves.
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SOP (Score:5, Insightful)
Not 10 years ago people were proclaiming the death knell for Microsoft because it missed the internet... then they bought "Internet Explorer" and... well you know how that turned out.
Microsoft has always made stumbles. Where they've excelled is their resilience to find the right solution and implement it in a good enough/cheap enough fashion that it doesn't make sense to buy the other guy.
Can they do this against Google? From a customer stand-point I'm not sure. I'm not just going to use Microsoft Search(tm) over Google so long as Google remains free and provides decent results. So Microsoft can't really win there. But they can steal ad revenue from Google by making their business/web-ads side more appealing to businesses. Get that, control the ad market and you'll be able to embrace and extend Google...
But this is a sign that Microsoft is "failing"? Not on your life...
Re:SOP (Score:5, Insightful)
In addition to DOS and Word that you mentioned, one thing that people might not know is that Microsoft bought a company called "Webcorp" in the '89-'91 range (I can not recall exactly). This company had created a rather slick Lantastic-like networking system on top of DOS. Being a BBS sysadmin (sysop in those days...) I was one of their beta testers and as a thank you for being a beta tester, I was always given the latest version of their software and watched it grow fro "functional" to "excellent."
long story short... Microsoft bought Webcorp and the Lan technologies they had created and hey... What do you know... Suddenly, out of Windows 3.1 was borne "Windows For Workgroups". Now with NETWORKING!... Another Microsoft triumph and INNOVATION...
The point of my long winded story? Microsoft is _NOT_ an innovator. Unless you define innovation as: a. Purchasing companies, or licensing technologies in order to incorporate them into an existing product or b. Purchase companies or technologies only to shelf said technology in order to promote their less capable, more buggy product.
I for one have been watching this endless cycle for years now (since '89 or '90) and have been fed up with it since just about that time.
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Re:SOP (Score:5, Insightful)
Everyone purchases other companies or licenses technologies from them. Guess what? OS X? Built off BSD and NextOS. Safari? Built off webkit. Google purchased Picasa, Sketchup and Earth Viewer (ie Google Earth). This 'endless cycle' you speak off is not limited to Microsoft.
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Re: (Score:3, Insightful)
Re: (Score:3, Informative)
http://www.betanews.com/article/1079773789 [betanews.com]
Microsoft bought Webcorp in 1993, Windows for Workgroups was first released in October of 1992 according to this document http://support.microsoft.com/kb/126746 [microsoft.com] from MS. WfWG was in development for more than a year before they bought Webcorp and was released at least several months before.
What's more, WfWG was not just an add-on for Windows. It was really the entire basis of Windows 95. It introduced the VMM model that Windows 95 was bas
Re:SOP (Score:4, Interesting)
Exactly what I thought, this is what Microsoft knows how to do best. They bought DOS (CP/M QDOS), they bought SQL Server, they bought powerpoint (forethought), Fox, Sourcesafe, Visio, etc... among LOTS [wikipedia.org] of other companies.
Microsoft does is not a "software" company per-se, it is a technology company which objective is to buy out the competition. They are just doing what they know to do best!
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Overconfidence (Score:5, Interesting)
About a decade ago, Microsoft balked at paying $8M for one of the key players, about three years ago, they were wincing at spending $20M in a decent search engine effort. "You'll end up paying billions for a search engine company if you don't spend this money now", was my advice. They didn't listen and here we are $46 billion dollars later after the FAST and Yahoo! acquisition.
Salon had a very similar piece today (Score:5, Insightful)
Ballmer's in charge (Score:5, Insightful)
Re:Ballmer's in charge (Score:5, Interesting)
Ballboy's unwillingness to speak the name of the "fucking guys" he was supposed to "kill" years ago shows how charmless and obsessive he can be. He is like a less personable Joseph Stalin with no big fur hat. His reign of terror will come to an end when Microsoft's shareholders start worrying about ~their~ value.
Microsoft has muscle, big teeth and claws and a walnut-sized brain. People like a company with cool ideas and vision. Google hits many notes perfectly. Apple hits some notes extremely well. Sun can sing but its ears are plugged. IBM gave up singing and now likes to set up the microphones. And Microsoft is the Michael Bolton of software.
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(YHOO+MSFT) = $6.5 bn loss in value (Score:5, Interesting)
MS should merge with ... (Score:5, Funny)
I think, I need to send my resume over to MS for the position of V.P. of Evil Strategy because they're just not cutting it anymore. I mean, really, Google is still around!? Geeze!
schadenfreude for Microsoft and Giuliani (Score:4, Insightful)
There's no way Microsoft can catch Google just like there was no way anyone could catch Microsoft. That train has already left. The only way to catch Google is for someone to develop something entirely new that can be dominated with new network effects. Something new like Facebook or Ebay.
MS a victim of what made it a success (Score:3, Insightful)
well, now it's against them. now THEY are the "traditional" guys with a backwards vision of computers, while google, yahoo and - surprisingly - apple have a grasp of how people see the digital world. google and yahoo caters to the connected crowd, and apple to the people that sees digital gadgets as fashion statements, two things MS with can't get a foot on.
of, course, MS is not going away anytime soon, the same way IBM, unisys, bull and HP are still around. what they need to do is recognize that they're pretty much irrelevant in those two markets, find a stable but big niche and stay on it. we don't see HP or IBM making atempts on the on-line or digital fashion markets, yet they're still huge and profitable.
so, here's a tip for microsoft: leave online services and fashion for the likes of nokia, apple, google, yahoo, etc. and go take care of what you do well: corporative operating systems like win2k (the only version of windows i dare saying i liked) and office tools.
"Don't be evil" (Score:5, Insightful)
Microsoft has no such public image. They were found [justice.gov] to use their monopolist position to kill Navigator and hurt Java. Their CEO is belligerent and takes shots at the FOSS community. More recently they've tried to buy the ISO vote for OOXML [os2world.com]. They don't trust their own customers, as evidenced by periodic, rude and disruptive Genuine Advantage challenges [wikipedia.org].
We're about to enjoy a big, fat, open class C block in the US spectrum, courtesy of Google. They purchased Android, and then opened its SDK to the world. In contrast, Microsoft has promoted hardware restrictions [wikipedia.org], media restrictions [wikipedia.org], and discourages use of unemcumbered codecs such as Ogg Vorbis.
Which company would you rather do business with, all things being equal? That is Microsoft's problem. They can spend all the $billions they like on buying market share... but they can't buy a reputation. When the FTC clears the Yahoo deal... Microsoft will still be Microsoft.
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I'm hoping that Yahoo! sees the light and doesn't accept the offer, EVER!
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Re: (Score:3, Insightful)
Because Sergei Brin looked at the way MS got pilloried in the mid-90s and decided that Google should have a propaganda arm devoted to convincing people that the company isn't evil. Thankfully for Brin, people are gullible and will believe simple assertions of Google's goodness even after Google reaches the point where they have more information aggregated about every person on Earth than the NSA could ever dream about
Re: (Score:3, Interesting)
I also have a Yahoo! home page that I look at many times a day. (I like it as a way of aggregating news headlines from different sources, along with market indicators, exchange rates, etc.) Although I don't have a very high opinion of Microsoft, I won't necessarily abandon it just because the deal goes through. But my expectation is that it won't be long before Microsoft manages to screw up the good parts of Yahoo! MS doesn't know how to run a Web site (of course, using Windows does give them a considerabl