When the Yahoo acquisition is completed, Microsoft will transition MSN users to Yahoo and leave its MSNBC.com service alone. Ironically, hackers hijacked the MSN DNS addresses shortly after the announcement and redirected all traffic to Google for about 90 minutes, before Microsoft could wrestle back control. Likewise, Yahoo’s DNS was redirected to its Chinese site, which has become a poster child for advocacy groups of corporate complicity in China’s stifling of free speech. Yahoo regained control in less than an hour.
It’s not yet determined which MSN functionality will be moved to the Yahoo site or what Yahoo functionality will be discontinued or changed. But Microsoft will transition to Yahoo’s advertising platform, which has done better than Microsoft’s, although neither has posed a significant threat to Google’s dominance in that sector.
“We expect a six-month transition planning process to make the final decisions,” said Steve Ballmer, Microsoft’s CEO.
Executives at both Microsoft and Yahoo indicated that Yahoo’s extensive datacenter holdings would contribute to Microsoft’s ability to offer Web-based services, such as the Web site hosting, Office add-ons, and Dynamics small-business on-demand apps that Microsoft has slowly been releasing under its Live brand.
Reaction from analysts and consumers ranged from disbelief to praise.
“This signals the death of Yahoo as it becomes part of Microsoft’s proprietary, awkward Live strategy,” said Mark Kelly, an analyst at The Buckeye Group research firm.
But Sara Ruiz, an analyst at RGB-Tech, said the deal was inevitable, given Microsoft’s mediocre efforts in the Web services and online advertising markets, the rising threat posed by Google, and Yahoo’s own loss of momentum in recent years.
“This couldn’t have played out any other way,” Ruiz said. “And that’s why the final price was not much more than Microsoft’s original offer.”
Ruiz said she expects most of the Yahoo’s senior management and board to quietly exit as the Microsoft takeover plan is implemented.
“We’ll see a lot of startups helmed by former Yahoo employees next year,” she predicted. But she thought the engineering and Web development staff would be showered with incentives to stay, including the ability to choose non-Windows computers if they wanted, as rival Google allows.
“This talent is what Microsoft bought, and the company can afford to be tolerant of a distinct Yahoo culture, at least for a while, because it is contained in the Silicon Valley," Ruiz said. “It can’t infect Redmond as easily from there, even though Redmond could stand a little infection.”
Trapezoid’s Hydecomb agreed that Microsoft would focus on retaining the engineering talent and see what it could take from the Yahoo culture “before absorbing it into the Microsoft collective,” but he was less convinced that the strategy would work.
“Microsoft said the same thing about its slew of small business applications such as Great Plains a decade ago, yet nothing really came out of them,” Hydecomb said.
Buckeye’s Kelly said he believes the acquisition was nothing more than a platform purchase to replace the anemic Microsoft MSN, ad platform, and search-engine businesses, and that once Microsoft learned to run them, it would not need to retain the Yahoo culture.
“This is a liver transplant, not a brain transplant,” Kelly said.
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