Microsoft + Yahoo : Interview in the Redmond Report

Ed Scannell, Editor of Redmond Magazine, spoke with Dana Gardner, president and principal analyst of Gilford,N.H.-based Interarbor Solutions Inc. in about the proposed deal. I have reproduced the comments in full here. [Source: http://www.redmondmag.com/]

Ed: How does Microsoft reconcile its undying commitment to Windows with the acquisition of a major company that has a strong open source-oriented development culture?

Gardner: Not sure they can. If this deal goes through, Microsoft becomes the owner of one of the largest distributed open source data center complexes in the world. This is unbelievable irony. [What] they are saying to large enterprises is, "Our way to win on the Web is to go open source and we liked it so much we bought the company." They instantly become an open source company. No two ways about it. For them to try and shoehorn the Yahoo data center infrastructure into a Windows environment is the equivalent of swapping the Atlantic and Pacific oceans.

Ed: What's the potential impact of Zimbra's open source collaboration tools as part of this deal?

Gardner: The Zimbra acquisition [by Yahoo last September http://tinyurl.com/22ha93] shows the importance of rich client vs. fat client approaches to business services such as communications, e-mail and collaboration. Yahoo, being a Web company, is interested in reaching out toward the rich clients with AJAX enablement. Microsoft is coming from the fat client side but moving toward the rich client side with Silverlight and other initiatives. Zimbra sits in the middle between the Yahoo heritage and the Microsoft heritage. It could be an interesting way for Microsoft to enter more rich application activities.

Ed: How do you see their corporate cultures meshing?

Gardner: Yahoo is very much a Silicon Valley company that is of, for and by the Web. Microsoft engineering is very centralized up there in Redmond, 850 miles away. Microsoft seems to think it will get a lot of engineering talent form this, but as we have seen with other big acquisitions, the talent has walked. So there is significant risk. Anyway, I think Microsoft is more buying the audience than it is the employees. Remember that Yahoo is much more a media company and Microsoft is an engineering and software company, which is where their corporate cultures are most at odds. I guess you need to be both these days to succeed. But one monetizes around advertising and media and the other around licensing software. It is more a case of a dissonance of business models than it is one of culture.

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