Microsoft Plans to 'fix' Its Online Branding

Microsoft is moving quickly to "fix" its online branding problem.


Microsoft Plans to 'fix' Its Online Branding

Now that a Yahoo acquisition is off the table, Microsoft is moving quickly to "fix" its online branding problem, an executive said Tuesday.

Microsoft has been criticized for the introduction of the Live brand, particularly because it didn't fully replace the MSN brand. That has created some confusion in the market, because some services from Microsoft, like Hotmail and Messenger, have both brands and it's difficult to determine if there is a difference between the differently branded services.

Now that Microsoft has pulled its acquisition bid for Yahoo, it plans to focus on solving its branding problem, said Kevin Johnson, president of Microsoft's platform and services division, speaking in Seattle on Tuesday at the Search Marketing Expo conference.

"When we made the bid for Yahoo, the full combination of those companies would have created a whole different set of brand opportunities for our marketing teams to solve," he said. "Since we've moved forward in not pursing a full combination at this time, our marketing teams are liberated to go solve that brand problem."

He suggested that his marketing executives essentially have free rein in deciding what to do. "Fix means fix," he said. The marketers may decide to build a new brand, and spend money to do so, and he'll support that decision, he said.

While a Yahoo acquisition is off the table, the companies do continue to discuss other alternatives, he said, despite very little comment from either company since acknowledging that talks about a more limited deal were happening. "We'll see where that dialogue leads, but there's nothing new to report," Johnson said.

Johnson also reiterated some of the themes that Microsoft executives have been talking about since the company pulled the Yahoo bid. "When you have a competitor that is entrenched, you have to focus on disruptive ways to change the paradigm," he said, referring to Google. Those changes could be in the form of user experience, the business model or the way consumers connect to the service, he said.

Microsoft has begun executing on this vision already, he said. The company's recently introduced Cashback service gives online shoppers money when they buy products from advertisers in Live Search. That's an effort to change the business model and the user experience.

In addition, on Monday Microsoft announced a deal with Hewlett-Packard that will result in a Live Search toolbar on HP PCs sold in North America starting next year. That deal will help distribution of the service, Johnson said.

Yahoo Postpones Board Meeting, Director Resigns

Facing a battle for its board, Yahoo on Thursday pushed back its annual meeting until the end of July and announced the resignation of a board member.


Yahoo Postpones Board Meeting, Director Resigns

The annual meeting, during which the entire board is up for re-election, had been scheduled for July 3. Yahoo did not yet set a particular date for the annual meeting but said that it will be around the end of July.

Billionaire investor Carl Icahn has been scooping up Yahoo shares and has told the company he is nominating 10 candidates to replace the entire board. He has said that in doing so he hopes to reignite talks with Microsoft, which recently pulled its acquisition bid for Yahoo.

In addition to the change in the annual meeting, Yahoo said Edward Kozel resigned from the board. In a filing with the U.S. Securities and Exchange Commission, Yahoo said Kozel had planned to leave the board in February but decided to stay on following the acquisition proposal from Microsoft.

As a result of his resignation, Yahoo has reduced the size of its board to nine directors, it said.

Google Holds Meeting on Microsoft-Yahoo Deal

Executives of Google Inc. held an emergency meeting last night to discuss the implications of revived talks between Microsoft Corp. and Yahoo Inc.



Google Holds Meeting on Revived Microsoft-Yahoo Deal

Executives of Google Inc. held an emergency meeting last night to discuss the implications of revived talks between Microsoft Corp. and Yahoo Inc., according to a report in The Times in the U.K.

Over the weekend, Microsoft said it might be interested in buying part of Yahoo, but not all of it.

For the past month or so, Google has been in talks with Yahoo to extend a two-week test whereby Yahoo would deliver Web advertising from Google alongside its own search results. According to various reports, that deal could be solidified this week.

Google and Yahoo could not be reached for comment at deadline. Microsoft declined comment

Speaking at the Google Zeitgeist conference in Hertfordshire, which was hosted by Google founders Larry Page and Sergey Brin, the company CEO Eric Schmidt said, "After this press conference, the three of us will meet and decide what our response is," according to The Times.

The renewed talks between Microsoft and Yahoo come as billionaire investor Carl Icahn gears up to launch a proxy fight to replace Yahoo's board of directors. Icahn and other investors are angry that Yahoo snubbed Microsoft's initial offer to purchase the company for US$44.6 billion.

In addition, according to The Times, Brin said Monday that he would give Yahoo's CEO, Jerry Yang, "refuge within Google" if he were forced out of the company. Brin also said Google had not yet ruled out a deal with Yahoo, The Times said.

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Microsoft Puts New Yahoo Deal on the Table

Microsoft said on Sunday that it has raised the possibility of a new deal with Yahoo, one that may involve buying a part of the company but not all of it.



Microsoft Puts New Yahoo Deal on the Table

"Microsoft is considering and has raised with Yahoo an alternative that would involve a transaction with Yahoo but not an acquisition of all of Yahoo," Microsoft said in a brief statement.
The company did not elaborate on the proposal. It said it did not plan at this time to make a new bid to acquire all of Yahoo, but that it was continuing to explore its options to expand its online services and advertising businesses.

Microsoft withdrew its offer to buy Yahoo on May 3 after the two sides failed to agree on a price. Since then, the activist investor Carl Icahn has said he will launch a proxy battle to replace Yahoo's board and force it back to the negotiating table with Microsoft.

Microsoft could not immediately be reached for comment, although published reports said the company is not discussing its plan further in public.

"There of course can be no assurance that any transaction will result from these discussions," Microsoft said in its statement. It said it reserved the right to reconsider its decision not to buy Yahoo outright, depending on any future talks with Yahoo, third parties or the shareholders of either company.

Meanwhile, Yahoo issued a statement later on Sunday confirming that Microsoft isn't at this time interested in acquiring the entire company.

"Yahoo and its Board of Directors continue to consider a number of value maximizing strategic alternatives for Yahoo, and we remain open to pursuing any transaction which is in the best interest of our stockholders," the statement said. "Yahoo's Board of Directors will evaluate each of our alternatives, including any Microsoft proposal, consistent with its fiduciary duties, with a focus on maximizing stockholder value."

That Microsoft is discussing a new deal could be a sign that Yahoo's leadership wants to avoid the spectacle of a proxy battle ahead of its annual meeting on July 3, the Wall Street Journal reported.

Yahoo responded to Icahn's threats on Friday, arguing that its own board has gave Microsoft's offer fair consideration, and that the current board, led by Chairman Roy Bostock, can best manage Yahoo's future.

It was unclear Sunday what type of alternative deal Microsoft has in mind. It said it issued its statement "in light of developments" that have taken place since it withdrew its offer.

Microsoft indicated earlier that it had moved on from the deal and that it was looking for other ways to grow its online business, internally or through smaller acquisitions.

Microsoft Won't Pursue Other Partnerships

Microsoft won't be pursuing tie-ups or takeovers to replace its failed Yahoo bid, Bill Gates said in Tokyo on Wednesday.


Microsoft Won't Pursue Other Partnerships, Says Gates

Gates, who cofounded the software maker and serves as its chairman, said Microsoft had "put a lot of effort into talking to Yahoo."

Referencing comments made by Microsoft CEO Steve Ballmer, Gates said that "now at this point, Microsoft is focused on its independent strategy."

Microsoft spent three months courting Yahoo but dropped its pursuit on Saturday after the two sides failed to reach agreement on a takeover price. Microsoft had initially offered US$31 per share and raised it to US$33 per share to try and entice Yahoo but the search engine operator held out for $37 per share.

After final negotiations late last week Ballmer signaled to Yahoo CEO Jerry Yang that it was throwing in the towel.

"We continue to believe that our proposed acquisition made sense for Microsoft, Yahoo and the market as a whole. Our goal in pursuing a combination with Yahoo was to provide greater choice and innovation in the marketplace and create real value for our respective stockholders and employees," said Microsoft CEO Steve Ballmer in a statement distributed early Saturday evening.

On Monday Yang, facing pressure from shareholders, signaled that Yahoo is still open to an offer from Microsoft or another company as long as the company is not "undervalued."

"We've always felt the Yahoo platform has been undervalued or underappreciated by the marketplace,'' he told Bloomberg News.

Gates was speaking in Tokyo and announced two programs from Microsoft Japan. One promotes Windows Media Center and the other will provide Microsoft's software development tools at no charge to student developers.

Microsoft Abandons Yahoo Acquisition

Microsoft has dropped its pursuit of Yahoo, ending an acquisition attempt whose failure takes Microsoft back to square one in its quest to boost its online business to better compete against Google.


Microsoft Abandons Yahoo Acquisition

Microsoft has dropped its nearly three-month-long pursuit of Yahoo, ending a historic acquisition attempt whose failure takes Microsoft back to square one in its quest to boost its online business to better compete against Google.

"We continue to believe that our proposed acquisition made sense for Microsoft, Yahoo and the market as a whole. Our goal in pursuing a combination with Yahoo was to provide greater choice and innovation in the marketplace and create real value for our respective stockholders and employees," said Microsoft CEO Steve Ballmer in a statement distributed early Saturday evening.

Microsoft had raised its initial bid by about US$5 billion, but that didn't convince Yahoo to accept the revised offer, Microsoft said. "After careful consideration, we believe the economics demanded by Yahoo do not make sense for us, and it is in the best interests of Microsoft stockholders, employees and other stakeholders to withdraw our proposal," said Ballmer.

In response, Yahoo issued a statement reiterating its position that Microsoft's offer was too low, and saying that many Yahoo shareholders agreed with its position.

"Yahoo is profitable, growing, and executing well on its strategic plan to capture the large opportunities in the relatively young online advertising market," Roy Bostock, the chairman of Yahoo's board, said in the statement.

Yahoo CEO Jerry Yang said that "with the distraction of Microsoft's unsolicited proposal now behind us" Yahoo can continue with "the most important transition in our history."

All parties with a stake in the deal had been waiting for Microsoft to announce its next move, after Yahoo failed to agree to a deal by last Saturday, the deadline Microsoft had set three weeks earlier.

But Microsoft stayed silent for days, as observers speculated whether it would walk away or prepare a hostile takeover. However, on Friday anonymously sourced reports in The Wall Street Journal and The New York Times said that Microsoft and Yahoo had turned a corner and were for the first time negotiating merger terms in earnest.

Microsoft and Yahoo Reviews the Deal

Microsoft and Yahoo have turned a corner and are finally negotiating in earnest about their possible merger.



Microsoft and Yahoo Try to Work It out

Microsoft and Yahoo have turned a corner and are finally negotiating in earnest about their possible merger, although a deal is far from imminent, according to media reports.

In anonymously sourced stories published online midafternoon Friday, both The New York Times and The Wall Street Journal reported that talks between the companies have suddenly gathered steam.

It has been three months since Microsoft announced its cash-and-stock bid for Yahoo, valued then at $44.6 billion but now worth about $42 billion because Microsoft's stock has lost value.

At the time, Microsoft's management sounded confident that the acquisition would proceed swiftly, but Yahoo's board threw back the offer in Microsoft's face, saying it undervalued the company.

Since then, talks between the companies have reportedly been few and unproductive, as Yahoo sought alternative deals and Microsoft threatened to go hostile or, lately, to walk away.

As Yahoo let lapse Microsoft's deadline to wrap up negotiations on Saturday, everyone with a stake in the deal has been anxiously awaiting Microsoft's next move.

As recently as Friday morning, consensus was that Microsoft would announce a hostile takeover strategy, such as launching a proxy fight to replace Yahoo's directors with its own slate of candidates that shareholders could elect at their next annual meeting.

However, now it appears that the companies have made progress over the so far apparently insurmountable disagreement over price, prompting Microsoft to stay at the negotiating table in the hopes of reaching a friendly deal.

According to The Journal, Microsoft indicated this week it would be willing to raise its bid to as much as $33 per Yahoo share, below the $35-per-share minimum that major shareholders are hoping for.

Microsoft's offer is currently valued at about $29.30 per share, according to The Times, whose sources said that a $34 per share offer could be a happy medium and get the deal done.

Microsoft Board Meets Over Yahoo Bid

Microsoft's board is meeting to decide how to proceed in the company's bid to acquire Yahoo.

Microsoft Board Meets Over Yahoo Bid

Microsoft's board is meeting on Wednesday to decide how to proceed in the company's bid to acquire Yahoo, The Wall Street Journal reported.

Quoting anonymous sources, The Journal reported that the meeting could yield a concrete announcement.

Microsoft's next move is something that all parties with a stake in the deal have been waiting for since Yahoo failed to agree to a deal by Saturday, the deadline Microsoft had set three weeks earlier.

Many observers had expected a reaction from Microsoft first thing Monday morning, but as the silence stretched into Wednesday afternoon, the media speculation mill has gone into overdrive.

The major stumbling block in the negotiations has been the price, which Microsoft is willing to increase to up to US$33 per share, but not to the $35 to $37 range that major Yahoo shareholders, management and board members want, The Journal reported. Microsoft's original cash-and-stock offer, made on Feb. 1 and valued at $44.6 billion at the time, stood at $29.12 as of Tuesday's market close, the paper said.

This week, Microsoft CEO Steve Ballmer has been personally lobbying big Yahoo shareholders so they, in turn, will pressure the board to accept Microsoft's bid, since Microsoft would prefer not to have to launch a hostile takeover, The Journal reported.

In the meantime, Yahoo and Time Warner have continued exploring the possibility of Yahoo merging with AOL in exchange for a 20 percent stake in Yahoo for Time Warner, The Journal reported.

In addition to attempting a hostile takeover, Microsoft has other options, such as raising its bid to a level agreeable to Yahoo's board or walking away, a possibility first floated by Ballmer last week.

Certainly, Microsoft expected the acquisition process, now nearing its third month, to flow much more smoothly and quickly, given the company's urgency to boost its Internet unit so it can better compete against Google and capitalize on the growth of the online advertising market.

source: www.pcworld.com

Microsoft to Google: You Owe Us

Google has succeeded partly because Microsoft built up the business, an exec says.

Microsoft to Google: You Owe Us

Microsoft's Chief Research and Strategy Officer Craig Mundie said Tuesday that competitor Google owes its business in part to Microsoft, and that his company is not concerned about losing its position as an innovator in the technology market to the search and advertising leader.

"If we didn't succeed at the PC, they wouldn't have a business," Mundie said of Google, in comments made via Webcast at the Goldman Sachs Technology Investment Symposium in Las Vegas on Tuesday.

He said Google was able to grow so quickly because it introduced a new business model for the Web at just the right time. "It wasn't that many years ago that Google didn't exist," Mundie said. But now that the industry and competitors like Microsoft are catching up to Google's online advertising strategy, "I don't think they can do anything we can't do," he said.

In fact, Microsoft's longevity versus its relatively new competitor gives it a substantial advantage long term over Google, Mundie said. "I'd like to think we're strategically open-minded, we've made adjustments [to our business model]," Mundie said. "I'd like to see Google and someone else come up with something that really threatens our business model."

Part of that business model is to combine forces with Yahoo to compete with Google in the advertising market. Microsoft is currently in the middle of what could end up becoming a hostile takeover of Yahoo, after the company rejected the software giant's US$44.6 billion cash and stock offer. Microsoft is now rumored to be mounting a proxy fight for Yahoo.

While Mundie acknowledged that he couldn't discuss much about the ongoing Yahoo proceedings publicly, he did concede that Microsoft is eager to acquire the company and move ahead on the Web. "Right now we'd just like to close the Yahoo deal," he said.

Even if the deal does not go through, however, he said Microsoft is confident its own Web strategy, fueled by a combination of software and services rather than an entirely Web-based portfolio, will eventually help the company catch up to Google -- barring a "major screw-up" on Microsoft's part.

Moreover, Microsoft has a multiyear lead on Google in providing software in mobile phones, another area where the Internet company aims to compete. "They're sort of late to the cell-phone thing," Mundie said, noting Microsoft's success with its Windows Mobile OS, which powers millions of smart phones worldwide

Microsoft Merger: Assures Jobs

A merger would still leave plenty of jobs to go around, a Microsoft exec reassures staffers of both firms.

Microsoft Pledges Job Security for Yahoo Workers

SEATTLE (Reuters) - Microsoft Corp suggested on Friday that it had no plans to make major lay-offs if it succeeded in buying Yahoo Inc, saying there were plenty of employee opportunities throughout the company.

Kevin Johnson, president of Microsoft's platforms and services division, said in an e-mail to employees in his unit that the company would dedicate "significant rewards and compensation" to retain Yahoo and Microsoft employees.

"While some overlap is expected in any combination of this size, we should remember that Microsoft ... has hired over 20,000 people since 2005, and we would look to place talented employees throughout the company as a whole," Johnson wrote in the e-mail that was posted on Microsoft's Web site.

"We have no shortage of business and technical opportunities, and we need great people to focus on them."

The e-mail sought to ease some of the concerns expressed by Microsoft and Yahoo employees about a potential merger.

Yahoo said earlier this week that it had put in place generous severance benefits that would be given to all employees who might be laid off if the company was sold. Analysts said it was common for a company in play to provide "golden parachutes" to take care of employees.
The companies are at a stand-off in Microsoft's $41.2 billion unsolicited bid to acquire Yahoo. Microsoft has offered to buy Yahoo for $31 a share in cash and stock, which Yahoo's board rejected, saying it undervalued the company.

Separately, two pension funds sued Yahoo Inc and its board for rejecting Microsoft's offer. The suit said Yahoo was pursuing other deals that were not as beneficial to its shareholders.
Lawsuits by Yahoo shareholders have multiplied in the wake of Yahoo's February 11 refusal to entertain the offer, which represented a 62 percent premium over Yahoo's share price at the time.

Johnson, whose division would ultimately absorb most of Yahoo, said the company would be "pragmatic" in how to address Yahoo's computer systems since they are not Windows-based.
In some acquisitions, Microsoft has prioritized continuity, according to Johnson, and the company has worked to make sure the acquired company's existing systems worked with Microsoft's own technology infrastructure.

He also downplayed the cultural differences between the two companies, seen as a hurdle to a smooth integration, saying some aspects of the two cultures will merge quickly, while others will remain unique.

Yahoo would bring a Web-centric view, media expertise and advertising talent to Microsoft, according to Johnson, who said Microsoft plans to maintain Yahoo's presence in Silicon Valley if a deal goes through.


(Reporting by Daisuke Wakabayashi; additional reporting by Gina Keating in Los Angeles. Editing by Braden Reddall, Leslie Gevirtz).

Yahoo Explains the Rejection

CEO Jerry Yang explains to shareholders why Yahoo rejected Microsoft's acquisition bid.


Yahoo Sends Letter to Shareholders Over Microsoft Bid

Yahoo CEO Jerry Yang cited the growing online advertising market and his company's position to take advantage of that growth as reasons for shareholders to reject Microsoft's acquisition bid, he said in a letter to shareholders Wednesday.

The letter, the contents of which Yahoo made public Wednesday, stated that Microsoft's February 1, US$44.5 billion [b] unsolicited takeover offer was too low. Yang said that Yahoo is the most visited site in the United States, held the top position in online display advertising, and counted almost one out of two of the world's Internet users as its members. He also said Yahoo is the top mobile destination in the U.S.

Yang did not cite sources for most of his claims. However, comScore Networks research from November 2007 confirmed Yahoo's online display advertising leadership, with almost 19 percent of the market.

The online ad market is expected to grow from $45 billion last year to $75 billion in 2010, Yang said, and that Yahoo wanted "to take advantage of what we see as a unique window of time in the growth -- and evolution -- of this market to build market share and to create value for stockholders."

The company plans to grow visits to its properties "by 15 percent per year over the next several years," although did not specify how. He also said that Yahoo's own search marketing system, Panama, along with two 2007 acquisitions -- Right Media and Blue Lithium -- would "complement and enhance Yahoo!'s existing capabilities and will make it easier for advertisers and online publishers to buy and sell advertising online."

Both Yahoo and Microsoft have struggled to compete with Google's success in online advertising, specifically its paid search and Adwords programs. Based on the same comScore data, Microsoft captured only 6.7 percent of online display ads. That poor performance is seen as the main impetus behind its move for Yahoo.

The letter made no mention of talks with News Corp. for some sort of share swap, intended either to offset Microsoft's interest or force the software company to boost its bid for Yahoo, as reported late Wednesday in The Wall Street Journal.

What's Behind Yahoo's Rejection of Microsoft Bid

Experts see the bid rejection as a negotiating strategy to elicit a higher offer and not as an attempt to resist a deal at all costs.


What's Behind Yahoo's Rejection of Microsoft Bid?

Yahoo's rejection of Microsoft's acquisition bid is likely a negotiating strategy to elicit a higher offer and shouldn't be seen as an attempt to resist a deal at all costs, according to analysts.

Neither Microsoft nor Yahoo has many options to improve their position in online services and advertising, and combining forces is their best bet against common rival Google, analysts said.

"It's part of a larger negotiation that's occurring. Clearly, Yahoo should be and is seeking a higher bid, and this is part of that process," said Clayton Moran, a financial analyst with Stanford Group.

Yahoo is unlikely to find a company willing to bid as much as Microsoft for it, while Microsoft will not be able to attain its Internet goals by acquiring a company other than Yahoo. "While they need to negotiate and go through the process, at the end of the day this deal will happen," Moran said.

Yahoo today rejected Microsoft's bid, saying it undervalues the company. Microsoft offered to pay $31 per share for half of Yahoo's outstanding shares and 0.9509 of a Microsoft share for the other half.

At the time of the offer, Microsoft's stock stood at $32.60 and the bid was valued at $44.6 billion, a 62 percent premium over Yahoo's stock price at the time. However, the bid's value has dropped with Microsoft's sliding stock price, which at press time was $28.10. At the same time, Yahoo's stock price has risen from a close of $19.18 on the day before the bid to $29.75 at press time.

Moran predicted that Microsoft will adjust its offer so that it ends up at $35 per share, probably increasing the fixed cash portion and reducing the variable stock portion so that value is less vulnerable to Microsoft stock fluctuations. A $35-per-share offer would be a midpoint between the original bid and the $40 per share Yahoo is reportedly seeking.

"We continue to view a Yahoo sale to Microsoft as the most likely outcome," Citigroup financial analysts wrote in a note published Sunday after press reports over the weekend that Yahoo would reject the Microsoft bid. The rejection isn't surprising, but rather consistent with Yahoo's board job to "extract maximum value" for shareholders, the Citigroup analysts wrote.

Yahoo has reportedly held talks with Google and AOL to explore alternatives to a Microsoft acquisition. One scenario being floated would be for Yahoo to outsource its search advertising business to Google, while another, reported Monday by The Times of London, has Yahoo and Time Warner's AOL discussing a possible merger.

However, neither option would match the potential benefits of an acquisition by Microsoft, Moran said. "A combined Yahoo-AOL wouldn't be particularly strong, and Yahoo's stock wouldn't react favorably to that deal," Moran said. A search partnership with Google would boost Yahoo's revenue but it wouldn't address larger problems within the company, he said.

For Moran, if Yahoo has approached AOL, it has done so probably to send a message to Microsoft that it has other options and that Microsoft has to sweeten its offer. Meanwhile, Google's intervention is probably directed at complicating and lengthening the negotiation process between Microsoft and Yahoo, and thus delaying the formation of a stronger rival, Moran said.

While merging with AOL is unlikely to give Yahoo the boost it needs, such a deal would probably be more palatable to Yahoo's management, because Yahoo would be the strongest party in the fusion, according to industry analyst Greg Sterling of Sterling Market Intelligence.

"Yahoo sees its own demise in a Microsoft acquisition. My sense is that Yahoo's management believes that Yahoo's soul wouldn't survive as part of Microsoft," Sterling said.

At this point, the situation is very complicated for both Microsoft and Yahoo. If Yahoo is intent on fending off Microsoft's advances at all costs, Microsoft could opt to walk away empty-handed and face a public embarrassment, or attempt a hostile takeover, which could alienate and scare away Yahoo employees it would want to retain, Sterling said.

At the same time, Yahoo can't simply wave away a generous Microsoft offer if it doesn't have an alternative to it, Sterling said. "There is a great deal at stake for both sides, and it's very complicated," he said.

Microsoft declined to comment about Yahoo's rejection. AOL didn't immediately reply to a request for comment about its reported merger talks with Yahoo.

Microsoft Tries Absorbs Yahoo

Analysis: The pairing gives Microsoft a needed outlet, but the outcome could quash Yahoo.


Would Merger Demote Yahoo to a Microsoft Front End
Elizabeth Montalbano, IDG News Service

While dealing logistically and technically with their overlapping online offerings will certainly prove troublesome if its bid to purchase Yahoo succeeds, Microsoft will at least have an immediate outlet for bringing more of its traditional desktop portfolio to the Web and to a broader customer base.

Microsoft has been trying for more than two years to find a critical mass to adopt new online services beyond search, e-mail and instant messaging under the Windows Live brand -- with little success. Its early MSN e-mail and IM offerings are popular enough with Web users; however, users of Google and Yahoo online services have been loathe to adopt the revamped Windows Live offerings in favor of the ones they're already using.

Not only could that change if the company purchases Yahoo, but Microsoft also will have a ready-made Web front end for rolling out more of its desktop applications as services, said Paul Fox, CIO of Guy Carpenter, a New York-based reinsurance company.

"The Yahoo platform is really what they're buying," he said. "With Yahoo they're tapping into the base culture of the Internet online community that's matured over the last 10 years. It's going to make it easier for people to take a look at and try their services, whereas before it had to be a more conscious effort."

Aside from the usual raft of consumer applications like search, e-mail, maps and the like, Microsoft already has brought some of its many business desktop applications -- such as Office and CRM -- online in hosted, though often scaled-down, versions.

Access to Yahoo's estimated 500 million visitors per month will give it a new channel to deliver what the company now calls its "software plus services" strategy, as well as buy the company time to bring more competitive versions of applications that were originally coded for the desktop to the Web.

Indeed, in the conference call discussing the Yahoo bid Friday, Microsoft CEO Steve Ballmer made a pointed reference to efforts to shed its desktop legacy and move even aspects of its Windows OS to the Web, a trend the company started with some features in the latest version, Windows Vista.

"The Windows user wants to be live, the Windows experience needs to increasingly embrace the Internet," he said. "There will be a Windows Live, there will be an Office Live, as we continue to bring out innovations in which Office transforms and is transformed by the Internet."

Ballmer also likely had the rising popularity of Web-hosted productivity software such as Google Apps, Zoho and Yahoo's Zimbra in mind when considering how to Web-enable Microsoft's desktop software. So far, Microsoft's Office Live has been more of a way for small businesses to get up and running with a Web site and basic hosted business applications like accounting and CRM; however, bringing a full productivity suite to the Web has been Microsoft's plan for some time.

Microsoft also can leverage its own strength among business customers to bundle and technically link applications so customers buy an all-in-one package rather than individual products. For instance, Microsoft has created tight links between a new unified communications product, Office Communications Server, and its Office and SharePoint collaboration software so customers must buy them all together to create comprehensive infrastructure. Microsoft can make similar attachments between online versions of its applications -- or just bundle them together in creative ways -- and market them to a broader audience.

"If Microsoft does something well, it's bundling products and services," said Ned May, director and lead analyst of marketing research firm Outsell. He joked that if Microsoft purchases Yahoo, there might come a day when you start up Windows and "up pops Yahoo and it takes you three days to remove that functionality."

"Yahoo provides a platform in many regards -- an audience of 500 million people to which you can bundle products and new offerings," May said.

Doing quick math, May figured that at "500 million a month for about $44 billion" it will cost Microsoft about $86 a head for acquiring each member of its new audience of Web users. "Not a bad deal," he said.

source: www.pcworld.com