Acquisition is not the answer for Microsoft

Microsoft versus Yahoo is the biggest drama we have seen on the internet since the days of Netscape. Microsoft’s unsolicited $44bn (£25.6bn) buyout offer was last week rejected by Yahoo’s board, which simply said, “Microsoft’s proposal substantially undervalues Yahoo.”

Few believe that, but the question that interests me is how this deal impacts the rest of us. What Microsoft is saying with this desperate offer is that it is failing to compete effectively with Google.

But attempting to merge Yahoo and Microsoft would be to the detriment of both. Anonymous insider Mini Microsoft has it right, observing in a blog post that “Microsoft absorbing Yahoo does not make sense given the extreme overlap in offerings that neither Microsoft nor Yahoo have been terribly effective at.”

Post merger, there would be internal jostling over what should be kept and what should be thrown away, and how to merge a thousand PHP applications with a thousand ASP.NET applications, instead of trying to build a better web platform for their users.

Leaving aside the merger, it is hard to see Yahoo reversing its decline, but there is still hope for Microsoft. Yahoo is a pure internet firm with little to fall back on. But Microsoft retains its power base in Windows and Office and, in theory, is well-placed to migrate those customers towards web platforms. It also has some excellent technology, including the Flash rival Silverlight, a collaboration product called SharePoint, and its ASP.NET web server platform.

Why then is it having limited success? Two recent incidents illustrate its problems.
The first was when I clicked on a Microsoft offer for a free electronic book on Windows Server 2008. I had to negotiate a maze of links, including signing into Windows Live twice, while servers were slow in delivering pages.

The second was reading the press release for the revamped Office Live Small Business, which says, “Support for Firefox 2.0 means Office Live Small Business tools and features are now compatible with Macs.” Presumably this means Microsoft has hitherto been trying to market Office Live without Mac compatibility, apparently missing the point that client-independence is one of the key reasons people move towards web solutions.

These incidents demonstrate how Microsoft often struggles to get the web right. It has the technology, ability and resources to put up a decent fight against Google. What it lacks is determination to get its Live platform working the way users want. That can only be solved by internal change, not by reckless acquisitions.