So why did Microsoft try so hard to buy Yahoo? Simply put, Google is Microsoft's nightmare come true, and the Windows maker needed Yahoo to better compete with that growing search beast in Silicon Valley.
Henry Blodget at Silicon Alley Insider has posted Tuesday a good look at how Microsoft's Windows and Google's search will stack up by 2009. The results aren't necessarily surprising, but they're certainly interesting to see in print: By this time next year, Blodget predicts, Google search will pass Windows in total revenue.
Google is no longer in Steve Ballmer's rear mirror. It's right next to him.
(Credit: Dan Farber/CNET News.com)Blodget makes a few other significant points: Both products are natural monopolies; both are incredibly profitable, with operating margins topping 75 percent, and Google search is growing a lot faster than Windows.
Of course, Microsoft doesn't just do Windows. The company has plenty of other, incredibly successful products, ranging from the Office suite to the Xbox 360 gaming console. But the mantra at Microsoft has always been that everything begins with Windows. When Windows has a real rival, Microsoft has real problems.
As Blodget notes, there are caveats: The unofficial Office monopoly should give Microsoft breathing room for a few more years. But even that could be threatened as Google's more-affordable Web applications improve.
This storm has been gathering for years. In 2005, we wrote a piece at News.com about Google's longterm threat to Microsoft. The impetus was a major management shuffle at MSN, but we had fun pulling out some old Microsoft memos about now-defunct Netscape in the early days of the World Wide Web. My favorite was a note written in 1995 by Microsoft engineer Ben Slivka describing a "nightmare" scenario for his company.
"The Web...exists today as a collection of technologies that deliver some interesting solutions today, and will grow rapidly in the coming years into a full-fledged platform (underlined for emphasis in the original memo) that will rival--and even surpass--Microsoft's Windows," Slivka wrote.
Microsoft didn't pay too much attention to the warning. Ten years later, another internal memo put a name to that nightmare--Google. Now Blodget has advanced that nightmare scenario a few more steps with his analysis.
It's always stunning that big companies can see a threat to their business years before it happens, and then fail to do something about it. (But then I suppose Clayton Christiansen wrote The Innovator's Dilemma for a reason.) Digital Equipment saw client/server computing on the horizon, and laughed it off. Sun Microsystems saw the threat from servers running x86 chips and Linux software long before it became a problem, but dithered for years before doing something about it. The list goes on.
More than a few bright minds inside Microsoft saw the threat years before it became a reality. The funny part is, they're still trying to figure out what to do about it.
In advance of the October 15 debut of Fox's new television business network, media svengali Roger Ailes spoke with The Wall Street Journal about Fox's plans. On other occasions, Ailes has described how the Fox entry will present a more pro-business face to the world than CNBC. That will be a tall order. With the exception of Mark Haynes and Michelle Caruso-Cabrera, CNBC's coverage is dominated by suck-ups and sycophants to the rich and powerful.
It's hard to believe Fox can engineer a more business-friendly turn. Then again, these are the same folks who left CNN and MSNBC in the dust by featuring a menu of leggy blond presenters and pro-conservative bloviators.
I was reading the Ailes interview as Google climbed above $600 for the first time in its brief but remarkable history. The inexorable march of Google's share price, breaking one record after the next, was an apt reminder that these are flush times in the business world.
And that's especially so for the technology business, where new products and new ideas are feeding an optimism that seemingly remains impervious to current events, natural or otherwise. High flyers like Apple, Research In Motion and Amazon.com continue soaring on strong sales and fat earnings reports but it is Google that remains the most amazing performer of them all.
After bouncing around $600 earlier today, shares of Google surged at the end of the trading day this afternoon to finish at $609.62 And it may not stop there. A financial services outfit called Nollenberger Capital Partners has increased its target price to $650 from $575. Meanwhile Bear Stearns has raised Google's price target to $700.
Even a disgraced stock cheerleader like Henry Blodget is weighing in on the betting. Back from his exile on Elba, Blogger has reincarnated himself (naturally, as a blogger), and earlier this month, Blodget raised the possibility that Google could hit $2,000 a share.
Why should anyone still believe Blodget? After all, wasn't this the same twerp who publicly pumped companies he privately disparaged to Merrill Lynch colleagues? (Blodget was later taken down by then-New York Attorney General Eliot Spitzer, agreeing to a lifetime banishment from Wall Street and the payment of a $4 million fine to the Securities and Exchange Commission).
However few people remember that during the height of the Internet bubble, Blodget's "crazy" prediction that Amazon would hit $400 a share came true--even though the stock subsequently reversed course and came crashing down to earth.
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