Sunday, 26 October 2008

My advice to Steve Ballmer

(By Richard Holway)

As readers know, I have been totally against Microsoft buying Yahoo.(For example see my 7th Apr 08 post - Would Microsoft walk away from Yahoo?) I think that would be fighting yesterday’s war. Google has already won in search. Even worse, would be buying Yahoo and AOL (one of the recent suggestions) As I said inThe Times this week ( Future for Yahoo unclear as pressure builds - The Times 21st Oct 08) “You can’t make a successful company by merging two unsuccessful companies”. Actually the quote I actually used was “If you tie two bricks together you don’t make them fly”.

The current/future battle at Microsoft is to defend its core business model. Put bluntly, the battle is not the DeskTop or the WebTop it’s what I have variously described as the MyTop and the MobiTop. If you are still unaware of what I'm talking about, I commend you to reread my 6th Sept 08 post – Race for MyTop still wide open)

I was asked by another newspaper when the Yahoo bid was first made, what I would do if I was Steve Ballmer. I said Don’t do it” to the Yahoo deal. But offered the advice that, for the same price, he could buy RIM (Blackberry), FaceBook and LinkedIn. I note with interest that this suggestion has been resurrected this last week. See Will Microsoft buy RIM? Businessweek 21st Oct 08.

Actually, $46b (the original price Microsoft put on Yahoo) would now buy you rather more than my original shopping list.

- RIM has slumped to a valuation of ‘just’ $25b. Apple has the iPhone. Now Google has the gPhone. Microsoft looks seriously deficient in the smartphone stakes.

- Facebook has accepted that it is worth nothing like the $15b valuation that the minor Microsoft stake bought last year had implied. Recent staff share deals have implied a much more sensible $3.75b valuation (read the excellent interview with Mark Zuckerberg in The Times 20th Oct 08 – Facebook founder puts idealism before profits)

- LinkedIn has this week announced a further $23m investment which values Linkedin at c$1b. (See Financial Times 23rd Oct 08 – Linkedin – the money keeps rolling in) Interestingly the new investors are SAP, Goldman Sachs, McGraw Hill and Bessemer Venture Partners.

Facebook and Linkedin are as close as you get right now of giving an idea of what a MyTop might look like and how it might operate. Put the social and business networks together into a single access controlled profile, add Microsoft applications like Outlook operating in the Cloud and put them all on a Blackberry and VOILA…you almost get Holway’s MobiTop. And all for less than $30b.

Steve, where should I send my introductory commission invoice? 1% will do.

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