Microsoft's failure to close the Yahoo deal, despite all kinds of loud talk and machinations, makes the Beast of Redmond look increasingly weaker. They may still pull it off, but even then the question is why do they need Yahoo so badly? The answer is that their dramatic failure with Vista took away their normal playbook.
This article in ArsTechnica is a good summary of current state of Vista. The part that jumps out is "Only 8 percent of developers are targeting Windows Vista". That is less than the 13% targeting Linux. 49% are sticking with XP. Microsoft's future depends on their developer ecosystem.
Microsoft new release adoption has always had that "resistance is futile" sense of inevitability, but this time customers are saying, "no thanks". It no longer feels inevitable and XP looks just fine as a stop-gap. Cloud computing feels more inevitable. The browser is all that matters, maybe Silverlight, Gears and other ways to tie the PC to the cloud. So Firefox goes from strength to strength, Apple is on a roll and Google Apps get taken seriously.
Mozilla, Apple and Google all executed brilliantly, but they would have had a much harder time if Vista had been on track.
Vista has some cool stuff under the hood. But that's like saying telling people your car has a revolutionary new carburetor when the engine keeps stalling and the back wheel just fell off.
Specifically, Vista has all the network stuff that Ray Ozzie needs to make his P2P vision (re-drafted as Mesh) into a reality. Vista adoption would also drive IPv6 and that enables P2P at a totally different level. P2P matters because it puts PC horsepower back as the driver and that of course makes the OS the driver again. P2P search for example could disrupt Google. P2P video could disrupt YouTube.
But those are all pipe-dreams if Vista stumbles and falls coming out the gate. And Vista seems to stumble and fall all the time. Back in November 2007, financial analysts were saying MSFT stock would recover when SP1 hits the market. But then in July we get lovely stories like this one. When you need to download 56mb and re-boot to get a few more words into a spell-check dictionary, entropy has reached a new level.
Thousands of firms are dependent on Vista success. Everybody gets to sell upgrades when a new release becomes essential. The level of skepticism in this Windows ecosystem has now reached the level where they are increasingly looking at alternatives, whether they are cloud based or Apple or Linux. if Microsoft loses the confidence of this ecosystem, they have a serious problem.
Without the massive leverage from the OS, Microsoft has to play catch-up on a field that is tilted in the wrong direction. That must be a very uncomfortable feeling and a new one for them. Combining # 2 and # 3 in search is not by itself a smart play. It does not do anything to grow the search volume or disrupt the # 1.
Most of the commentary has been about Yahoo's problems. Microsoft's Vista problems might be worse. Looking at the 6 month stock chart for Microsoft vs Yahoo vs NASDAQ implies that investors see it this way. YHOO is actually a tad above NASDAQ and MSFT is way below. 6 months is an eon to the funds that make the call on this.
Yahoo shareholders are being asked to accept a mix of cash and Microsoft stock. How comfortable should they be that Microsoft really has the Vista problem licked? If they have big doubts on that score they might be better sticking with an independent Yahoo.
Comments
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Given the content of your article, it's evident that you know little about the actual _facts_ concerning Vista, Microsoft, competitors, and its back story -
This post is little more than a pointless restatement of some generally uninformed media "opinion" that adds neither value nor facts to the discussion.
You start with a hypothesis - Microsoft needs Yahoo! because Vista was a failure - but then fail to back it up, both in terms of proving Vista is a failure OR that Microsoft needs Yahoo! (actually undermining this latter point by saying that any acquisition of Yahoo! will, in fact, not work).
You also don't explain the last point - having the "Vista problem" "licked," or why it would matter in the context of the Yahoo! acquisition.
Posted by: Michael Griffiths | July 11, 2008 12:42 PM
A very interesting read. Its not something that I'd thought about before. I think the biggest thing you've mentioned is that most of the development market and. more importantly, the users are now heading to the cloud. MS should have made it very easy for dev teams to integrate their apps with the web but as far as I know the support isn't what it could have been. Given how much time people spend on the Internet now and how flexible people have become in their work, MS seem to have missed the boat when it comes to cloud and should have been linking Office to the web years ago. If people start working online constantly there will be no tie to MS Windows OR office, the two cash cows they've always had, and then where are the revenue streams going to come from?
The Yahoo deal seems to smack a bit of desperation. Rather than trying to catch up, they should be looking to solve the next problem. Mobile and the interactive table are good places to start. Lets see what G does about those...
Posted by: Adido Web Design | July 11, 2008 2:02 PM
I find the statement that only "8 percent of developers are targeting Windows Vista" to be extremely vague. If it means individual programmers who have been given the task of implementing Vista-only functionality in their employers' products, then it is believable but uninteresting. Many products run on all the recent Windows versions but contain very little Vista-specific code, or none at all.
If the statement is referring to software development companies, then there's still a problem with what is meant by "targeting". If that means adding features that make use of Vista-only functionality, then it sounds like a pretty high number.
My own company's product had to have some work done to make it run on Vista due to changes in its security policies. However, it takes no advantage of Vista-only functionality. If I had been asked if my company is targeting Vista, I'm not sure how I would have answered.
Posted by: Paul Topping | July 11, 2008 2:39 PM
This is no offense, just a look into how to (possibly) lie with statistic:
You link to the 3 months stock chart of YHOO vs. MSFT vs. Nasdaq to underline your argumentation with hard facts. The numbers serve you pretty well, as MSFT obviously loses miserably compared to YHOO:
6m: YHOO > Nasdaq > MSFT
Ok, now - just for fun - have a look at the other medium-term periods, the chart tool offers, and compare the outcome of each company:
3m: Nasdaq > MSFT > YHOO
1y: YHOO ~= MSFT ~= Nasdaq
2y: MSFT ~= Nasdaq > YHOO
Wow, that's a hell of a useful tool :)
Posted by: Fabian Neumann
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July 11, 2008 2:49 PM
Oh my. you really got no clue how Microsoft Stock works and it different from google or yahoo stock do you?..
on the rest you are wrong. one thing is that vista got a slower projection by 36% (gasp!, i know the numbers) compared to what they wanted. but to say that vista with 170 million licenses sold is a failure? well. then i don`t know what to say. then there is the other part where the OS biz now only accounts for 40% of microsoft.
I don`t mean this in a disrespectful way and i know that researching a post like this can take up to HRS but avoiding doing research is not a good thing. i may have more typos in my blog posts because english is not my first language. but i ill be damned if they are not well researched.
Posted by: Avatar | July 11, 2008 6:02 PM
a little correction.
when i say that the os biz only accounts for 40% i meant the common consumers OS (in this cycle vista in specific), not the server OS biz,back up OS(WHS) the robotics OS, surface, mobile, embedded, auto, etc,etc.
Posted by: Avatar | July 11, 2008 6:05 PM
Everytime microsoft realease something people are desperate for it to fail. Windows machines are constantly bad mouthed but how many of us use them? Lets be honest the alternatives aren’t great due to compatibility issues, its not easy trying to run your games on linux based machines. Yes its true that Microsoft just seem to copy ideas from others such as tabbed browsing etc etc but they’re the market leader and aren’t going away. Vista is a standard now and we’d all better get used to it.
Posted by: neil | July 12, 2008 12:31 AM
@neil: Sad but true.
I'm a Linux fan... always have been, always will be. But I use Windows for compatibility. It's that simple/painful. :)
Posted by: Robert | July 14, 2008 1:58 AM
I don't agree that "people are deperate for it to fail" everytime MS releases something. Windows 95, W2K, and XP were all enthusiastically received and loaded by most people and businesses that I'm familiar with. W95 was a decent prodoct relative to 3.1 and W2K and XP are still good OS's.
I work as a contractor for two large Fortune 100 Companies and neither have rolled out Vista and aren't planning to do so in the near future.
Anecdotally speaking, I personnally know only one person who has loaded Vista, and kept it loaded on their home system. I know of many who have purchased new computers with Vista that have either deleted it and gone to a Linux distro or downgraded/dual boot to XP.
Vista has problems, period, and because of it, at least as far as the desktop is concerned, so does Microsoft.
That's not to say Microsoft is hurting overall, their server products are as good as ever, but they have definitely stumbled and,I daresay (and religious zealotry aside), have even lost some market share to the likes of Mac OSX, Ubuntu, and Mandriva.
JC
Posted by: John | July 14, 2008 6:11 AM
The only thing that keeps Microsoft in business is their original patent on Windows and all of the money they have made. Their policies are self-destructive, and require the power of the patent to keep them on top. They sell their products to foreign companies for a fraction of what they sell to foreign countries. They try to keep total control of their customers so that they can't buy other products. I have never seen such an unreliable product. We have seen them introduce their new products, and they fail during the first demo. As for Vista, by now it should have been their best product, and by a large margin. It evidently isn't. It seems that they don't fully understand much about hardware design or system design, two very important considerations for the design of a system. Nothing new for Microsoft. Hopefully it will get better with the leaving of Gates, but I doubt it.
Posted by: drv | July 14, 2008 6:12 AM