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Microsoft should declare anti-bankruptcy

I am amazed by this Microsoft bid for Yahoo, and it makes me think that business people need to consider doing something like anti-bankruptcy more. Presumably the clever ones already do it quite a lot, on the quiet.

What I have in mind is that Microsoft has made huge pile of money, but has now run out of ways of making such money in the manner that it has become accustomed to. So, it should simply cease trading.

If Microsoft can not mend Windows and beat off Linux, Apple, etc., then they are out of business (business as they know it) and should accept the fact. The XP version of Windows continues to be a respectable operating system, and a company should be set up and sold off (to its employees probably) to keep it going for as long as there is life in it. But that forty billion (and maybe more) dollars that Microsoft seems determined to throw at Yahoo should instead be distributed to shareholders and employees, and spent or saved just like normal money. I know very little about all the details of it, but I have the overwhelming sense – and the overwhelming sense also that many others have the overwhelming sense – that the Yahoo purchase will be money down the drain. One over-the-hill business buying another over-the-hill business, and shoving them together with giant bulldozers. They were two very impressive hills in their time, but together they will not get any bigger or better. If I was a Yahoo shareholder, I would be pinching myself with joy, but trying to stay cool and get the best price from these deluded maniacs, which according to the story linked to above, is just what is happening.

A business does not have to go on for ever in order to have been a triumphant success. Microsoft should quit while it is still, just about, ahead.

Is this stupid?

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28 comments to Microsoft should declare anti-bankruptcy

  • Jacob

    Microsoft should do as it pleases with it’s money. I’m very, very far from being in a position to give them advice, and I guess, so are you, Brian.
    I don’t thing it makes sense for you (or me) to rant about why Microsoft ofers to buy Yahoo. I guess they know a thing or two, and, if they ultimately fail – then it’s their money, not mine.
    And, don’t you hasten to portray Microsoft as a company past it’s prime time. Companies go up and down, and there is no need, at the present, to start predicting M’s demise.

  • I don’t thing it makes sense for you (or me) to rant about why Microsoft ofers to buy Yahoo.

    Why not?

  • M$ shot itself in the foot with Vista, and with the last service pack for XP giving it a performance boost of around 20% over its younger stablemate, Vista’s fortunes are not looking good.

    Microsoft is now too large and too entrenched in its way of doing things for it to be competitive anymore. People are begining to wake up to the fact that a PC doesn’t have to run M$ software to do what they want it to and the IT world is changing and advancing faster than ever and getting faster. A behemoth the size of M$ with all its attendant bureaucracy is going to struggle to keep up. Unless something really drastic changes in the culture of the corporation its going to die, it can either bow out gracefully or be dragged off kicking and screaming, losing its shareholders an awful lot of money on the way.

  • I think that makes sense.

    MS Office still has legs (so long as they don’t ‘innovate’ to make it unusable) and some of their project management stuff is rumoured to be good.

    I don’t think MS will die completely, but it may suffer a similar fate to IBM (and Sun and other previously dominant players) – dominance reduced, still doing good research (MS’s research labs are fantastic, pity marketing and production aren’t so great…)

    Windows is a mess, the next version is rumoured to be a large rewrite. They could produce a good system if they throw away native backwards compatibility like Apple have done, but the larger installation base could make that tricky to pull off.

    Given the rate of change of technology I would not put any money on this, but I can’t see any radical innovation from Microsoft (getting out into the real world anyway) and I think they’ll miss the next boat (as they famously did with the Internet).

  • Jacob

    Why not?

    I (we?) don’t know enough about it to make our rant meaningful, though, of course, ignorance can’t be considered reason enough for not to rant.

    I, in my ignorance, can see nothing wrong with Ms buying Yahoo. They might turn this into a success story, or they might fail, but I can’t see anything wrong with them trying.
    Maybe I missed Bryan’s point…

    its going to die

    As I said, it’s a little bit early to start predicting M’s death, though, eventually, every corporation dies, just like people do.

  • So?

    Oh come on, idle speculation is fun! (I should be working right now, but here I am, worrying about the future of MS.)

  • Microsoft does more than just sell an operating system.

    Businesses buy, sell, reconfigure and abandon their individual units and products all the time.

    You’re basically arguing that Microsoft is destined to end up as another Westinghouse without acknowledging that it might instead become another General Electric.

    I know this much: No central planner or antitrust bureaucrat can figure it our better than the Microsoft directors, officers and shareholders can.

  • See also, “IBM” — which sells almost no computer hardware anymore, but is hardly dead.

  • Nick M

    Vista is dreadful. MS Office is well, I still use Office 2000 and see no reason to upgrade, so no I don’t think it has legs. Especially not now that OO is basically the same thing for 0$.

    Seeing as we’re indulging in wild speculation here’s one… MS builds the Vista’s replacement on a Linux core (a bit like OSX). Why not?

  • Johnathan Pearce

    Microsoft is now too large and too entrenched in its way of doing things for it to be competitive anymore.

    A bit of a sweeping statement; the demise of Microsoft, like that of American capitalism, has been widely reported, for years.

    It is nevertheless true that when companies reach a certain size, they can be hampered by their sheer bulk in responding to upstart rivals. This is healthy and good. It also nails the argument, put forward by anti-trust folk, that big firms inevitably crush their rivals and stifle potential new companies. In fact, the size of a big firm can be a handicap; look at how GM and Ford got caught by the-then smaller, nimble Japanese carmakers in the 1970s, etc.

    If Microsoft is making what is essentially a defensive move by buying Yahoo! and the latter’s advertising revenues, time will tell whether this is a waste of cash or smart strategy. I would not write off Gates just yet.

  • “just about ahead”? In the last few years, they’ve lost something like 2.5% of the desktop market to Apple and Linux, leaving them something like 94% of the desktop market.

    As Kip notes they do a lot more than just Windows. There’s things like Office, Exchange, the server management tools like SMS, and SQL Server that are used in corporations.

  • APL

    Microsoft want Yahoo, in order to sell the same sort of thing that Google is seemingly giving away, worldwide collaborative office documents.

    Google Docs

    This sort of thing must be a worry for a company that makes it bread and butter from selling a very overpriced office productivity suite.

  • Alex Jacques

    This is a bit on the periphery of the discussion, but Yahoo! is a major user of FreeBSD and, if I understand correctly, has made some contributions in the past.

    No source for the second declaration, but see http://www.freebsd.org/internet.html 3rd paragraph, “Yahoo”.

    (If you aren’t familiar with it, FreeBSD is a particularly robust open source Unix based on the original BSD code and caters primarily to the server market. IMHO Linux is a bit the poor cousin in terms of stability and simplicity. Moreover, precious little stops me from switching my primary workstation from Linux to FreeBSD while my server already runs it.)

    This being a relatively small project, I would hate to see the fallout of a Microsoft acquisition of Yahoo! if this implies less visibility and less development resources for FreeBSD.

  • Owinok

    I must be cautious in offerring advise to managers at MS but I still think that Brian has a valid point here. Start with the history of major mergers and the fact that two corporations that are being left behind by a rival are unlikely to merge into success. In addition, the size of the cash being spent should worry every shareholder because the premises of the strategy do not look right. merger of both firms will not necesarilly result in their combined market share. I would not go as far as asking for declaring bankruptcy but this is no good bet.

  • RRS

    The serious might want to take a peek at Esther Dyson’s (you remember her, of course) current take on this kind of thing:


  • andyinsdca

    Microsoft sees the writing on the wall. Selling software (ie: selling someone a CD/DVD with an application) is going to be dead in a few years. Also, the PC as you and I know it is going to be dead in a few years. As was mentioned by an earlier poster, Google is getting ahead of the game with Google docs.

    Think about this for a second: What do people REALLY do with their PC? Surf the web, check email, write documents (spreadsheets and Word docs), store photos, store music, synch their devices (ipod, Blackberry, etc) and play games. With a few exceptions (like the game Call of Duty), you don’t need to waste $1000 on a PC to do that. Since you don’t need a PC to do that, you don’t need an OS like Vista or Leopard and you definitely don’t need software like MS Office.

    So, where does that leave Microsoft? They need to change their stripes. They need to move into the realm of hosted applications to stay in the home-user market. Otherwise, Microsoft will fade into obscurity with home users…

  • “Anti-Bankruptcy”?

    I think a better way of putting it would be to call it the retirement of a corporation. Sounds much more graceful.

  • Nick M

    The PC is like Mark Twain. Rumours of it’s death are greatly exagerated. Remember the whole Oracle net computer thing? That really broke the mold didn’t it?

    No, you don’t need a $1000 PC for those things but… it sure as hell makes life easier and $1000 is not a huge amount of money compared to the utility most of us will get out of the machine over it’s life-time. And then there are people who do want to play CoD or do video editing, or graphic design or coding or any number of things for which there is hitherto (or in the forceable future) better online solution.

    I’d much rather run my stuff on a machine under the desk than on some sodding server elsewhere. I mean some people create on their machines. They don’t just consume and their is always going to be a need for something more than a glorified smart-phone.

  • Nick M

    no better online solution – obviously.

  • Mr. Micklethwait;

    With regard to MicroSoft saving the money, that’s actually very difficult for corporations and amounts that large. Unless you think Yahoo! is going to crash and burn, buying their stock is a way of saving / investing that money.

    Mr. Mills;

    That’s an interesting idea. One that might be implemented by keeping XP alive for backwards compatibility, so that the Vista successor can start cleaner.

    As for using a Linux base, honestly the NT kernel is fine and has quite a lot of nice features and structure, speaking as some one who has done both Unix and NT kernel hacking. I think Vista’s problems are at a much higher level than that.

  • The Thin Man

    I think the factor you are not considering, and it should be considered, is the effect on most businesses of sudden MS withdrawal from the market.

    Many thousands of small and medium businesses are totally Microsoft powered and their investments in the technology (Server 2003 and now 2008, MS SQL Server, Exchange Server ISA Server, System Management Server, Sharepoint Server and many others) and the training and intellectual resources invested in M$ are enormous (that $40 billion did not just come from desktop operating systems and office).

    It is still the case, for example that Microsoft Accreditation – MCSE or MCSA qualifications for example, along with Cisco qualifications are still trhe absolute benchmarks for hiring IT support staff.

    Whatever M$ shortcomings and failings, manifold indeed, the cost (in operational and HR terms) to many businesses of a sudden withdrawal from the market would be terrifying.

  • JerryM

    As a long time shareholder, I agree it would be nice to get some of that cash back in dividends as they did several years ago with a $3 share special dividend.

    But one of the biggest assets Yahoo has is those millions of @yahoo.com addresses, something GOOG does not have.

    Also, xbox has a pretty good reputation.

  • R C Dean

    One over-the-hill business buying another over-the-hill business, and shoving them together with giant bulldozers.

    One is reminded of Time Warner and AOL.

    How did that turn out? My recollection is that Time Warner lost its shirt.

  • Microsoft’s directors should be able to do what they want with the company’s money, just as the share holders should be able to withdraw their capital if they don’t like the way that the company’s directors are using it. Property rights after all. As for Microsoft’s recent problems I would say that this is simply a problem of too much beaucracy, which can happen in companies just as it always happens in the state. Luckily the market does tend to punish any company that gets to clumsy and there are always smaller rivals just itching to steal their lunch, just as Microsoft once did to IBM.

  • I could really care less what Microsoft does with their money.

    I do believe their bid for Yahoo, while in line with their past practice of simply purchasing capabilities, instead of initially developing them. Their most recent attempt at internal product development , without using someone else’s work as a starting point, has been a notable failure – Vista. Aside from the annoying aspects that the average consumer is currently experiencing, anyone that listened to the vaunted promises and took a look at the initial “Longhorn” betas (“Longhorn” was, at one point, an early developmental name for the Vista project), realizes this. This strategy, acquisition versus development, has served them in the past, but the formula probably won’t be as magical this time around.

    In the previous instances, Microsoft acquired realatively unknown apps that didn’t really have comparable competitors that were widely known – and as such, the Microsoft appropriated and tweaked versions were “new” to the consumer base.

    In this case, there already is widely known competition, in the form of Google, and their online services. And while Microsoft is probably hoping to salvage/resurect their online sector, there’s already a less than favorable brand impression in the Microsoft part, and the Yahoo portion, well, it’s not so super-duper spectacular as to grab or re-grab a huge market share simply because of the merger. People may check it out from curiosity, but the window of opportunity for the product line to razzle, dazzle, and excite will be very, very small. And if it fails to dazzle, they’re done.

    And while Microsoft has been able to foist off warmed over versions of the same old pig in new lipstick with their various OS and Office releases over the past 10 years, due to the cost of Microsoft divestment being significant – when considering not only up front software cost, but support and training for IT staff and employees, as well as the uncertainty of the efficient continuation of critical business processes during and immediately after ‘switching horses’ – in this instance they don’t have a ‘captive audience’ of customers already in the bag.

    Which leads me to just snicker at the thought of this merger idea, and the reasons for doing it.

    And yes, it’s Microsoft’s money. To do with whatever they (and their shareholders) want.

    I say go for it, guys

  • CFM

    Hmmm. I’m running Vista Ultimate 64 bit, and it works just fine. Fast, stable, and lots of features. Why are so many folks so upset with it?

  • Gregory

    They’re called teething problems. Not to mention overpromise, underdeliver. Not to mention that MS forgot people as a whole hate change (no matter what comes out of their mouths) and Vista is a whole lot of change in terms of UI. Not to mention the ridiculous amount of horsepower you need to enjoy Vista. Not to mention, finally, the fact that UAC is a serious bummer.

    All in all, I like Vista + patches. Vista SP1 promises to be a much better proposition, I think. Vista SP2 will probably be the ideal (we can hope). Games running on DX10 feature some serious eye candy (but not so much on audio – see OpenAL).

  • curmudgeon

    Its been mentioned before but I think bears repeating : shareholders ‘hold’ an implicit option they can sell their shares in the market ( implicitely ‘cashing out’..for them the company is winding up and distributing cash to them…that should be what a share is worth anyway )..or hold on in a belief that the managment team can continue to perform. In so far as the ‘fold up’ option is already avaialble to a shareholder ..this (folding up MS) is probably a non starter …the market will decide the probablity of success of such a venture …we may idle all we want but the guys with skin in the game seem to think its not such a bad idea so far….For a dispassionate observer you have a well entrenched player (GOOG) earning pretty margins ….two of its big competitors are preparing to merge to compete …in ANY other industry that would be the way to go….