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Weekly Column

Wimpy: Why is Yahoo so afraid of Microsoft?

Status: [CLOSED] comments (64)
By Robert X. Cringely

Every few years I actually make a television show for PBS and one of those rare occurrences is coming this month with "The Transformation Age: Surviving a Technology Revolution with Robert X. Cringely." Because of PBS scheduling anarchy you'll have to check your local listings to see when the show is on. It is about the obvious realization that as Moore's Law changes technology, technology in turn changes society in ways that are not always predictable. We look into the past and then into the future and put things in a perspective that a general audience can understand. AND it's probably the only place you'll see a Carly Fiorina interview. If you catch the show, please let me know what you think of it.

This week readers have been asking for my perspective on a number of news events, so I think I'll take this space to cover a number of topics, though not in my usual depth.

Several readers are concerned about Microsoft's decision to stop selling Windows XP and -- most importantly -- end security updates for the venerable operating system. This has everything to do with business and nothing at all to do with technology. Wearing my business reporter's fedora, then, I'll point you back a week or so to Microsoft's most recent earnings announcement, which disappointed Wall Street. This is significant because it is hard to find a Wall Street analyst who remembers the last time Microsoft's earnings were disappointing. It simply doesn't happen. That's because Microsoft has a myriad of tools for adjusting the numbers to look just right.

Because Microsoft has so many tools for fine-tuning its financials (primarily the management of expenses, by the way -- Microsoft makes so much money that it tunes the numbers by throwing cash away), the fact that this last set of numbers disappointed suggests to me that they, too, could have been avoided. Microsoft probably decided to deliberately take an earnings hit precisely so they could play the "we have to get the earnings up" card to justify the final death of XP.

Microsoft has been under huge pressure from its hardware OEMs to dump XP, thus forcing millions of customers who have been avoiding Vista and Vista's inevitable hardware upgrade to finally buy new computers. Dumping XP will help Dell and HP AND Microsoft, big-time. It won't do anything for you or me, though, since Vista still sucks, but we obviously don't matter.

Those customers who think they'll keep XP going on their own will probably be out of luck, too. With Microsoft abandoning security upgrades, hackers will eat holes in the old OS practically overnight. And if one or more of the security companies like Symantec or McAfee think they can make a business out of defending XP, I simply doubt that customers will pay.

Another reader asked about this week's big WiMax announcement in which Sprint and Clearwire will merge their WiMax assets with $3.2 billion in support from Intel, Google, and others. The reader figured that this would provide a viable third broadband competitor for DSL and cable and this one would also support mobile operations, which is why Comcast and Time-Warner Cable have money in it. Is this a death knell for telcos or what?

My vote is for what because it certainly isn't a death knell for DSL by any means.

We've gone over these numbers before in previous columns, but the fact is that WiMax is not as good as it is supposed to be. Those 30-mile-diameter WiMax cells we read about are a joke. While a typical WiFi hotspot covers about an acre, a good WiMax hotspot or cell will cover about a square mile. That's 640 times bigger, but far from the 10 to 30 miles promised in the marketing materials.

The ideal size for a WiMax cell is a compromise between user demand and backhaul economics. You want to serve as many users as possible but not so many that you can't economically provision adequate Internet bandwidth per user. If WiMax really could support those 30-mile cells it would be great, because then all that would be required was to drop a cell at every backbone point-of-presence, directly tapping a gigabit fiber. But since real WiMax cells are smaller this means installing backhaul circuits -- mainly DS3's (45 megabits per second) -- which in today's world takes us back to that one square mile.

Rather than a masterstroke, this merger of Sprint and Clearwire assets is more an act of desperation. Neither company was going to make it on their own. Sprint very nearly sold out to Comcast (not just the WiMax bits but everything) but the Comcast offer was realistic, not generous. Adding in the Intel and Google money made it marginally smarter to try for the combined WiMax network, instead. Intel wants to sell WiMax chipsets and offer WiMax integration that AMD cannot while Google just wants to keep the big broadband ISPs reeling. The two cable companies that are investing want to leverage the much larger investment of their partners to gain a viable mobile network, mainly for Voice-over-IP phone service.

This doesn't mean WiMax will be a failure, by the way, but just one of several mainly mobile data options in the market.

For a final data point in this WiMax story, look at this week's announcement from Cablevision about their planned WiFi build-out in the footprint of their existing cable TV network in New York, Connecticut, and New Jersey. Cablevision has no licensing problems, no backhaul issues (they'll use their cable network), no site problems (they'll use their cables or utility poles -- space they've already paid for), and no sticky business model (the WiFi network will be free for Cablevision TV subscribers). This is SO much simpler than most WiFi or WiMax build-outs. Yet if you dig through the story you'll see the wireless network will take two years to build at a cost of $350 million just for the New York City metro area. So that $3.2 billion Sprint and Clearwire are getting isn't very much money after all.

The other big story this week that readers have been asking about is, of course, Yahoo and Microsoft. Taking my usual lateral view of things I find myself wondering why the people of Yahoo -- not just CEO Jerry Yang, but pretty much EVERY Yahooligan I have spoken to -- is so afraid of working for Microsoft? For Jerry, who -- oddly for a computer scientist -- has always seemed to be guided more by his gut than his intellect, it is mainly a matter of ego. He'll be a billionaire either way. But the people I know who work at Yahoo are simply afraid of working for Microsoft, as though Ballmer and Gates eat their young.

This isn't so much a Yahoo versus Microsoft perception, by the way, as a Yahoo versus MSN. Compared to Yahoo, where life has been cushy for a LONG time, MSN IS a pretty Spartan place. More importantly, at MSN there is a culture of confrontation. Where at Yahoo people with bad ideas or bad attitudes are generally isolated, sometimes at great expense to the company, at MSN those people are fired and thrown out of the building. Maybe in Yahoo's general feeling of inadequacy compared to Google, the geeks figure they couldn't survive at Microsoft, hence the whole Jonestown ambiance we sense around these recent events.

What's ironic is that Microsoft actually WANTS some Yahoo DNA, but the Yahooniks have been brainwashed not to believe it. As I have written before, Microsoft knows it has to change its ways to succeed in a new world without Bill and Steve, so becoming somewhat un-Microsoft-like is a good idea, but that can't be led from within.

Microsoft still needs Internet market share, however, so they may come back for another try at Yahoo, but it is more likely they'll try the same hostile approach to Facebook. Hostile because Zuckerberg won't want to be acquired any more than Yang did. But in the case of Facebook Microsoft will probably succeed. And Yahoo will ultimately let Google handle both search and ads because Google will richly reward Yahoo for doing so and because it will allow Yang and Filo to return to the content business they so enjoyed in their heady days of early success in the 1990s.

Yahoo will never dominate the way Microsoft or Google have, but as a going business, the best days of Yahoo probably still lie ahead.

Don't forget to watch my show.

Comments from the Tribe

Status: [CLOSED] read all comments (64)

Microsoft buying Yahoo might be good for Microsoft, but it wouldn't be good for Yahoo, and I think that's why Jerry Yang was so against doing a deal, and why he held out for a valuation so much higher than the original stock price.

I mean, who really wants to be bought out by a company that:

1) Is a convicted monopolist in 5 or 6 jurisdictions
2) Has carried out a 10 year battle with the EU over whether they would obey the law
3) Has avoided obeying the law in the USA by buying of the Bush regime
4) Threatened to stop making Korean versions of Windows and Office when the Korean competition people moved against them
5) Destroyed emails deliberately rather than turning them over during discovery in the BURST case
6) Redesigned their Email Server software to make it easier to destroy emails so they cannot be turned over in discovery
7) Used dirty tricks to get ISO approval of OOXML
8) Has a reputation that is so low that the company can walk under a snake with a top hat on

In effect what Jerry Yang was saying was that he didn't want his company bought by the Tony Soprano of the tech industry, and I can't blame him one little bit.

Wayne | May 19, 2008 | 12:18AM

Watching The Transformation Age as I write (0400 am - 0500am 19 May 08, Ch. 13, KERA-TV , Dallas-Fort Worth, TX). You need to make an episode based on your recent education columns.

Kevin Kunreuther | May 19, 2008 | 5:40AM

Watching The Transformation Age as I write (0400 am - 0500am 19 May 08, Ch. 13, KERA-TV , Dallas-Fort Worth, TX). You need to make an episode based on your recent education columns.

Kevin Kunreuther | May 19, 2008 | 5:41AM