Shutteworth on Microhoo: "This deal is all about flailing"
Mark Shuttleworth offers some interesting insight into the Microsoft/Yahoo! deal. Two negatives may make a positive in multiplication, but they don't in mergers and acquisitions, as Mark points out:
The Microsoft and Yahoo thing is fascinating. I think the ad game is lost. So, Microsoft buying Yahoo! now on search? Come on. Two failing operators will just continue to decline together. On search, I think it's totally a waste of time....
So, for Microsoft, this deal is all about flailing. For them to succeed in that next generation game, they will need to have a vision that is better than Yahoo!'s vision, which is better than Google's vision, and they need to execute it.
Not that Mark expects them to pull it off:
They [Microsoft] already have a hell of a big investment in whatever their vision is. It's not like they were waiting to buy Yahoo!. They were spending gagillions of dollars, which they have, on data centers for that sort of vision. So, what does Yahoo give them then? A brand, which they will probably screw up....I wonder if Microsoft isn't about to swallow a hand-grenade.
A tier-3 player doesn't leap into first place by buying into second place. Yahoo! does some things better than anyone - for example, I think it has a huge opportunity in the enterprise with Zimbra. But Microsoft isn't looking at these winning businesses to fuel its $44 billion ambition. No, it's looking at Yahoo!'s flailing businesses to undergird that valuation, and that is why Microhoo is doomed to fail.
All of which is fascinating, because it's the first market that Microsoft has attempted to buy rather than build internally. Microsoft tends to succeed when it goes it alone through sheer force of the billions at its disposal (with a little sprinkling of monopoly power to ensure success :-). If Microsoft were to succeed in acquiring Yahoo!, it would be in uncharted territory on a number of different levels.
Suddenly Microsoft would be faced with technology - much of it open source - that it has never experienced, with a company culture as firmly behind that technology vision as Microsoft is behind its own. It would borrow to complete the deal. And so on.
Microhoo will fail. Most mergers do. But this failure may do more than waste a few billion dollars and the best that Yahoo! has to offer. It may accelerate Microsoft's demise as it strikes the decisive blow to Microsoft's ability to own the future.
Matt Asay brings a decade of in-the-trenches open-source business and legal experience to The Open Road, with an emphasis on emerging open-source business strategies and opportunities. Matt is vice president of business development at Alfresco, a company that develops open-source software for content management. He is a member of the CNET Blog Network and is not an employee of CNET. Disclosure. You can follow Matt on Twitter @mjasay. 
