LOGIN | REGISTER NOW | SUBSCRIBE
 
 
News on Monday
more>>
SharePoint Tech Report
more>>


   

 
 
Download Current Issue
ISSUE 2/1/2010 PDF

Need Back Issues?
DOWNLOAD HERE

Receive the print Edition?


 
blogs tab
Visual Studio 2010 Release Candidate Available Today
A Visual Studio 2010 release candidate is available on MSDN.
02/09/2010 09:45 AM EST

Is Microsoft eyeing Office subscription pricing?
Microsoft may be preparing to offer a new Office pricing option called "union," which charges the same for cloud as on-premises.
02/01/2010 09:38 AM EST

Facebook rewrites PHP runtime
Facebook is about to open source its own PHP runtime, written from scratch for speed.
01/30/2010 08:53 PM EST

 

Events calendar tab
Macworld 2010
2/9/2010 to 2/13/2010
San Francisco
IDG World Expo

SPTechCon 2010
2/10/2010 to 2/12/2010
San Francisco
BZ Media

PyCon 2010 (Python Conf.)
2/17/2010 to 2/25/2010
Atlanta
Python Software Foundation

Southern Calif. Linux Expo
2/19/2010 to 2/20/2010
Los Angeles
SCALE

IBM Pulse
2/21/2010 to 2/24/2010
Las Vegas
IBM


 
print Printable version 
Most Read Latest News Blog Resources
Facebook brings HipHop to PHP
HipHop compiles PHP to speed up the Web layer at world's most popular social networking si...

Adobe moves LiveCycle application platform to the cloud
Release gives developers just what they need to create targeted business process-oriented ...

Oracle acquires AmberPoint
Today's merger will probably affect most of AmberPoint's existing partnerships with other ...

Digg!  Digg
Reddit  Reddit
Slashdot  Slashdot
Share on facebook  Facebook
Share on Twitter  Twitter

FUD and Dud


By Larry O'Brien
June 15, 2007 — 
Generally, the business goings-on of Microsoft are sufficiently distanced from the facts of their technologies that I leave business analysis to others. Reciprocally, the Wall Street Journal hardly ever takes a stand on threading models. Two recent items, though—the ugly patent-violation claims against Linux and the staggering US$6 billion purchase of aQuantive—are impossible to ignore, going, as they do, to the greatest shortcoming that a technology company can suffer: appearing to be unable to compete on merit.

Given the Kafka-esque absurdities of the patent system, it is entirely possible that Microsoft’s intellectual property portfolio contains some claims that are duplicated in Linux components. Nonetheless, the patent-violation claims made by Brad Smith and Horacio Gutierrez in an interview with Fortune magazine are textbook examples of FUD. Sowing “fear, uncertainty, and doubt” was, remember, a contemptible practice originally deployed by IBM to maintain dominance. The claims of Smith and Gutierrez, with specific numbers associated with various subsystems, were not the result of a plausibly deniable slip during a question-and-answer period, but rather were as accidental as a carrier group in the Strait of Hormuz. The McCarthy-like refusal to be specific (“I have here in my hand a list of names…”) was additionally off-putting.

Yet the possibility of a serious Microsoft assault on IP violations in open source software is minimal. At the risk of overstretching the military metaphors, a strike against Linux would draw retaliation from IBM, Novell and any number of minor powers. The logic of the Cold War and mutually assured destruction applies.

The aQuantive acquisition is less clear-cut in its noncompetitiveness, but the numbers don’t seem to add up. The $6 billion aQuantive purchase is a direct response to Google’s US$3 billion acquisition of DoubleClick. aQuantive earned US$442 million in 2006. Microsoft paid around 14 times that; Google bought DoubleClick for around 10 times that company’s US$300 million revenue. The premium paid relative to earnings is startling enough, but when you look at just the ad-serving components, it gets even more stark. aQuantive’s Atlas Suite earned only around $152 million in 2006, a level not much greater than DoubleClick’s ad-serving earnings in 2004 prior to being taken private. (The majority of aQuantive’s revenue comes from Avenue A/Razorfish, which Microsoft will almost certainly sell or spin off.) Since DoubleClick serves about 50 percent more impressions per month than Atlas, and DoubleClick has already sold off most of its non-ad-serving components, it’s a virtual certainty that Google got a much better rate per ad impression than did Microsoft.

Of course, acquisitions are not just about today’s revenue but future earnings. One buys infrastructure, technology and talent. That makes sense for Google—the addition of the few thousand DoubleClick employees seems a good strategic fit for a company of fewer than 10,000 employees. Microsoft, on the other hand, already has 70,000 employees and for some time, the importance of ad-serving has not exactly been a secret.

It’s one thing having trouble developing the next version of the world’s most popular operating system, or developing search algorithms superior enough to grow market share, but an ad-serving network? Without trivializing the implementation of such a system, it falls within the realm of what one would expect Microsoft to be able to build internally. The choice to instead spend something like a decade’s worth of revenue to acquire a division (and, undoubtedly, a passel of amply rewarded middle and senior management eager to spend energy carving out fiefdoms) is a disheartening vote of no confidence in Microsoft’s ability to nurture “intrapreneurs.”

It had to do with timing, you say? Buying share in a market that’s still growing rapidly ultimately produces greater total revenue? To a company of Microsoft’s size, this acquisition is a “tuck in”? Perhaps.

Sowing FUD about open source
software might (might) work with the readers of Fortune, but it has lost its credibility with software development professionals. “Buy, don’t build” may be attractive to Wall Street, but not to elite young programmers considering where to spend their careers. Technology companies do not thrive or deteriorate solely on the basis of whether a strategy can be justified to an MBA. There is another group whose support is absolutely vital. “Developers! Developers! Developers!” as some have put it.

Larry O’Brien is a technology consultant, analyst and writer. Read his blog at www.knowing.net.


Share this link: http://www.sdtimes.com/link/30741
 

Add comment


Name*
Email*  
Country     


  • Comment
  • Preview
Loading