Friday, April 25, 2008

Is Microsoft pursuing Yahoo in fear of Google?

Microsoft doesn't just want Yahoo, they want them really, really bad. The reason why may not be so obvious. You can accept Microsoft's explanation, you can speculate that it is just a stock strategy to make executives rich or you can join the legions of paranoid geeks who think Microsoft is trying to take over the world. I offer you that it may be all about fear of Google.

Why would Microsoft fear Google? After all, Microsoft makes it's money from software and Google doesn't have any business interests in that market sector at all. It may seem that way, but Google has the potential to really take a bite out of the software giant's customer base. How they could do it comes in the form of something you may already be familiar with; the concept of Web TV.

Web TV and web only computers use the model that your computer is just a portal to the web. The advantage of this is that your computer could be extremely inexpensive. Imagine a computer that costs $50 to $100 total. No software to buy, no complex and expensive operating systems to update and maintain. Just in case you missed it, that means no Microsoft Windows. And, with a few key software acquisitions by Google, it could easily mean no Microsoft Office either.

Those of you familiar with the "web only" computer introduction, know that it never managed the momentum needed to threaten Microsoft's profits. However, what happens if Google developes and promotes cheap hastle free computing?

Google's absolutely dominant share of Internet users provides them with the world's largest captive market. They can reach unprecedented amounts of potential computer buyers with lowest cost of anyone in the world. Combine that with Google's cavernous deep pockets and you have a company that can make the web only computer initiative a huge success.

The sales pitch will be appealing to a large majority of PC users. A cheap, small and convenient computer with a simple operating system that never crashes, never gets viruses, never loses your files, does not need expensive operating system upgrades or software. Just a small monthly membership fee and your google homepage will be filled with all of the applications and features that you used to find on your desktop. And the sales pitch will be everywhere you look on the web. Google's web dominance would allow them to create the biggest tech buzz in history without anyone else's help.

It doesn't take a wall street analyst to predict the effect that would have on Microsoft's sales. You better believe Microsoft is more aware of that threat than anyone. In fact, it is probably the only legitimate threat to the software giants virtual monopoly. The best defense they have is to buy that threats principal competitor.

Microsoft's strategy may be just that. Buying Yahoo in itself won't hurt Google much. But, if Microsoft can successfully integrate and market Yahoo, Live and MSN into a single strong competitor, Google will be forced to stay focused on maintaining their market share and will have far less resources to attack Microsoft's customer base. If this is Microsoft's motive, this preemptive strike may actually be based on good intelligence.

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