Microsoft: 'We love open source'

A couple comments on this NetworkWorld Article:

Everyone in the Linux world remembers Microsoft CEO Steve Ballmer’s famous comment that Linux is a “cancer” that threatened Microsoft’s intellectual property.

Ballmer is still CEO of Microsoft, but that comment occurred in 2001, a lifetime ago in the technology market. While Microsoft hasn’t formally rescinded its declaration that Linux violates its patents, at least one Microsoft executive admits that the company’s earlier battle stance was a mistake. Microsoft wants the world to understand, whatever its issues with Linux, it no longer has any gripe toward open source.

In 2010 Microsoft is trying hard not to be public enemy No. 1 to open source proponents, in some cases by making key contributions to open source code and in other cases by making Microsoft products interoperable with open source software.

“We love open source,” says Jean Paoli of Microsoft in a recent interview with Network World. “We have worked with open source for a long time now.”

The mistake of equating all open source technology with Linux was “really very early on,” Paoli says. “That was really a long time ago,” he says. “We understand our mistake.”

First, the article is correct: we all do remember the “Linux is a cancer” comments made oh so long ago. Unfortunately for Microsoft though, they have much to atone for. It’s not just the vituperative comments made in 2001, but the continued incursions since: the 235 Linux patent violations, the OOXML debacle, the HTC and TomTom licensing issues – the list goes on and on. Does that mean that Microsoft can’t change its ways? Of course not, but it does mean that many in the Open Source ecosystem are going to be a bit circumspect. I continue to believe that the odds of Microsoft truly changing while Ballmer is still CEO are minuscule, but I could be wrong.

Paoli’s recent work involves a new Microsoft initiative to promote interoperability among the key components of cloud networks. The initiative, described in July at the O’Reilly Open Source Convention, is attempting to promote data portability; use of standards-based technologies; ease of migration and deployment across cloud networks; and developer choice.

The initiative isn’t strictly an open source project but it does illustrate Microsoft’s evolving relationship with open technologies.Microsoft seems to be making a concerted effort to befriend portions of the open source community, and the company could benefit in the public relations game from unpopular moves by Oracle, which is ending the OpenSolaris project and suing Google over use of open source Java in Android.

Along with the Cloud initiative the other large initiative mentioned centers around virtualization. It’s no accident that Microsoft tends to look toward Open Source and favor interoperability in markets where they are weak and demonstrably NOT the market leader, while doing all they can to fight interoperability in the markets where their cash cows are. There’s nothing wrong with this per se, and they do have a fiduciary duty to maximize profits, but it is something to keep in mind. Like other large companies such as Oracle, they’ll tend to be opportunistic supporters of Open Source.

But while the Linux driver project seems to be a success, it does not mean the entire “open source community” is ready to call Microsoft friend instead of foe. Open source is an approach to developing technology, and to some extent a philosophy. By its nature, open source cannot be represented by a single voice.

“You need to be careful about the term, ‘open source community,'” Kroah-Hartman says. “That’s a huge group, all of which operate independently and have their own views and goals. All I can represent is my own view as a member of the Linux kernel team and as a developer who creates different Linux distributions.

A good point by Greg KH and something that too often gets lost or misunderstood by the media. there is no single “Open Source Community”, but a large Open Source ecosystem made up of other ecosystems, communities, companies and individuals.

Microsoft is only “dabbling” in open source at this point, argues Matt Asay, chief operating officer of Ubuntu Linux vendor Canonical, in a column for The Register.

“One big bet Microsoft should make is on open source, the tool of the underdog, a label that is coming to fit the Redmond giant,” Asay says.

Microsoft “needs to go deep on Linux,” not by replacing Windows with Linux but by “acquiring Novell’s SUSE Linux business and focusing it completely on mobile,” Asay argue (though perhaps he simply wants Microsoft to take out one of his competitors).

Am I the only one who thinks it’s odd that the COO of Canonical is suggesting that Microsoft should acquire Novell?

Microsoft has an opportunity to boost its reputation among open source proponents in part because of public relations mistakes by Oracle, which as noted earlier is ending the OpenSolaris project and suing Google over use of Java.

The unfortunate thing for Oracle is that it has previously embraced Linux by belonging to open source organizations, contributing to the Linux code and supporting Linux in the enterprise, Lyman says. In the case of the Java lawsuit, Oracle appears publicly to be attacking the open source community at large, even though its specific target is Google.

The Oracle moves do make Microsoft look good by comparison, Lyman says.

“This is good for Microsoft, that Oracle is being talked about as a foe of open source software,” he says. “A lot of observers see similar behavior from Oracle that is the stuff that got Microsoft in trouble. Oracle probably could have done a better job of making sure nobody thought they were attacking open source.”

If there ever were a time where Microsoft had the ability to ameliorate its image in the Open Source world, it’s now. I’ve covered the recent Oracle issue here and here, but suffice it to say that Oracle has stepped into a tenuous position in the Open Source world. Whether Microsoft is adroit enough to parlay that into them looking better by comparison remains to be seen.

–jeremy

Amazon Sells GNU/Linux down the River

From @glynmoody:

Here’s a particularly stupid move by Amazon:

Microsoft Corp. today announced that it has signed a patent cross-license agreement with Amazon.com Inc. The agreement provides each company with access to the other’s patent portfolio and covers a broad range of products and technology, including coverage for Amazon’s popular e-reading device, Kindle™, which employs both open source and Amazon’s proprietary software components, and Amazon’s use of Linux-based servers.

Microsoft has consistently refused to give any details of its absurd FUD about GNU/Linux infringing on its patents, which is not surprising, since they are likely to be completely bogus and/or trivial. So Amazon is showing real pusillanimity in making this unnecessary deal. Shame on you, Jeff.

The official press release is here. Is Microsoft out to once again start using FUD against Linux? The Financial Times seems to think it’s a possibility:

Late on Monday, it announced a patent cross-licensing deal with Amazon. Among other things, this will cover the e-commerce company’s use of Linux in its servers. That is a big deal: given Amazon’s ambitions to become one of the biggest operators of public computing “clouds”, this amounts to a major endorsement of Microsoft’s claims over some of the core IP in Linux.

There is a caveat, though: the announcement was short on detail. And that is sure to bring accusations that the software company is once again using FUD to scare other Linux users into submission.

It’s easy to predict how this will be received. Once again, Microsoft will be accused of using underhand methods to advance its claims against Linux. Remember the anger in open source circles when Linux distributor Novell reached its own deal with the devil? But the agreement still stands, and other big Linux users will be forced from now on to factor that in to their assessments of the IP risks of using the software.

As FT notes, details at this point are pretty scarce. Large companies enter into deals like this all the time though, and while it’s disappointing to see Amazon do this I can’t say it’s a huge surprise. What I do find surprising is that Microsoft decided to make a large press release about the deal. For its part, Amazon doesn’t seem to be releasing any additional comments. So is this a sign that Microsoft may once again try to get the patent FUD against Linux going? Will this force other companies to capitulate into signing similar deals? It’s too early to tell, but I hope not. I’m hoping additional details become available soon, which may help us glean some of the motivations behind the deal (which does specifically mention the Linux-based Kindle). As more details become available, I’ll post an update.

Additional Reading:
TechFlash
Financial Times
Jim Zemlin
Microsoft-Amazon IP deal dusts up old ‘target Linux’ story

–jeremy

Roundtable Discussion: Why Can't We All Just Get Along (Liveblog)

Panelists:
Jim Zemlin – Linux Foundation
Ian Murdock – Sun
Sam Ramji – Microsoft

* Lessons learned after being at MSFT for a couple years as the “Open Source” guy
– Sam: When he came in from BEA, things working together “just made sense” to him. Day 1 he would have explained what he was doing a bit better to the legal team. Engineers tend to change much quicker than lawyers, whose job is to mitigate risk.
* Similar question to Ian:
– Was a bit of a culture shock going to Sun. He was used to working at 50+ person companies that he had started. Thinks he may have been a bit naive when first going into Sun. “Large companies have more inertia than you might think”.

* It’s clear that Microsoft sees the computing landscape changing. What can the Open Source crowds do to help the agents of change within the company?
– Sam: We’re a large company and some parts are changing faster than others. Identifying that there is a place to go with the things you think are not going well is important. He’d like to be seen as the unelected representative within Microsoft for us. He might not have an immediate answer, but he wants to better understand the problems.

* Why does he (Sam) care what the Open Source and Linux communities think?
Sam the person: “I think computing just needs to get better”
Sam the MSFT representative: We’re at a point in our history that we need to understand what the next engine of growth is going to be.

* What is Sun going to do with MySQL?
– Ian: We’ve fully committed to the Open Source model. MySQL represents a huge opportunity. The kinds of software you see being used in Web 2.0 and cloud computing represent a new dynamic. Sun’s global sales force plus products like MySQL are where Sun will grow.

* Where is Microsoft going next?
– Sam: We want to build software that is in demand on every platform. He sees 4 general directions for this: server, client, mobile and cloud.

* Sam: “When you hear the same thing from enough customers, you listen…even if you don’t necessarily agree”. Gave the example of Microsoft supporting PHP, despite having put a lot of resources toward and really liking ASP.NET.

* We’re clearly disappointed about Software Patents in this community. The recent FAT lawsuit included.
– Sam: We agree there are issues, but don’t think the whole system should just be thrown out. Says Microsoft suffers more than anyone else in the current system. Spends over $100M a year defending against patent suits. Did not address FAT lawsuit specifically.
Ian: It’s a bit of an arms race and large companies feel the need to amass patents for defensive reasons. No one wants to be the first to drop all their patents.

* Ian: With cloud computing, are we losing many of the advantages of Open Source?
– Jim: I don’t think the operating system discussion is going to be decided for a while.
– Sam: Now the “cloud” is just elastic computing. The next cloud with be more like Google App Engine or Microsoft Azure. The idioms and structures are different… it’s a whole different environment.
(Note: I don’t think they fully understood the question Ian was asking, but it’s a really important question…and one I’ll be thinking about quite a bit moving forward. It’s not always just about access to the code. It’s about the code being usable outside the original context, portability and other related issues)

* Question from Jeremy Allison: Asserting patent rights is fundamentally against the Open Source ethos. FAT lawsuit aside, Jeremy would simply like clarity around what interoperability IS possible and what interoperability (from a legal perspective) IS NOT possible.
– Sam: We learned a lot from the work MSFT did with Samba on licensing protocols, but it won’t scale to 1,000 of protocols. “We can and must do more about predictability on where we’re going”. Places where we currently have a licensing program are probably good places for Open Source to stay away from, at least in the near future. “We need to improve here”. The SMB/CIFS agreement went through 35 iterations in 6 weeks. We’re willing to learn.

The final consensus: where we can be more clear with each other, let’s do it. Linux, Microsoft and Sun are all going to be around for the long haul. We’re all going to be here, let’s make the best of it. Let’s move beyond ideology and be pragmatic.

That’s the end of the Summit for today. See you at the Exploratorium for the evening reception.

–jeremy

End Runs Around Vista?

BusinessWeek recently ran an article that indicated that HP may be working on a version of Linux to ship on its hardware:

The ecosystem that Microsoft (MSFT) has built up around its Windows operating system is showing signs of strain. In one of several recent moves by partners that sell or support the company’s software, Hewlett-Packard (HPQ), the world’s No. 1 PC maker, has quietly assembled a group of engineers to develop software that will let customers bypass certain features of Vista, the latest version of Windows. Employees on a separate skunk works team are even angling to replace Windows with an HP-assembled operating system, say three sources close to the company.

HP acknowledges the first effort. The company formed the “customer experience” group nine months ago and put at its helm Susie Wee, a former director in the company’s research labs. Her team is developing touchscreen technology and other software that allows users to circumvent Microsoft’s operating system to watch movies or view photos more easily than they can with Vista. “Our customers are looking for insanely simple technology where they don’t have to fight with the technology to get the task done,” says Phil McKinney, chief technology officer in HP’s PC division. After Vista was introduced last year, it drew criticism for slowing down computers and not working smoothly for certain tasks.

McKinney says any discussions about building an operating system to rival Windows are happening below senior-management levels. He doesn’t deny some employees may have had such conversations, but he says HP isn’t devoting substantial resources to such projects. “Is HP funding a huge R&D team to go off and create an operating system? [That] makes no sense,” he says. “For us it’s about innovating on top of Vista.”
WEANING FROM WINDOWS?

Still, the sources say employees in HP’s PC division are exploring the possibility of building a mass-market operating system. HP’s software would be based on Linux, the open-source operating system that is already widely available, but it would be simpler and easier for mainstream users, the sources say. The goal may be to make HP less dependent on Windows and to strengthen HP’s hand against Apple (AAPL), which has gained market share in recent years by offering easy-to-use computers with its own operating system.

HP’s moves come as several of Microsoft’s closest partners are stepping up their support for Windows alternatives.

To be honest, I’m almost surprised that HP or Dell hasn’t done something like this already. It’s clear that consumers do not like Vista and Apple is making huge strides recently. Moving to an in house Linux variant would give an OEM more control over their own destiny, better integration with their own hardware, product differentiation and higher margins. That being said, it would also come with the potentially steep downside of annoying Microsoft, who has proven they are willing to punish OEM’s for seriously considering alternative desktop Operating Systems in the past. We may be reaching a turning point though. At some point soon I think you’ll see that Microsoft just may be more dependent on the OEM’s than the other way around.

So, that brings us to the following question: why is HP letting this news out in this way. It could be a couple of things. It could be testing the waters to see how Microsoft will react. However, it could just be using this as a barging chip to get a better OEM deal on Windows, or more co-marketing dollars out of Microsoft. I’m not sure which direction I’m leaning at the moment, but I think it’s clear that one of the major OEM’s are going to do this very soon. With the recent announcement by Ubuntu that it is going to try to refine the Linux desktop experience to be more inline with the Apple experience, things look to be coming together nicely. The first OEM that sincerely jumps in the water on this one is going to have a significant lead IMHO.

–jeremy

London Stock Exchange crippled by system outage

On a day that would have seen extremely brisk trading volume due to news in the USA, the LSE was down for nearly the entire trading say. From Reuters:

LONDON (Reuters) – The London Stock Exchange (LSE.L: Quote, Profile, Research, Stock Buzz) suffered its worst systems failure in eight years on Monday, forcing the world’s third largest share market to suspend trading for about seven hours and infuriating its users.

The problem occurred on what could have been one of London’s busiest trading days of the year, as markets rebounded worldwide following the U.S. government’s decision to bail out mortgage companies Fannie Mae (FNM.N: Quote, Profile, Research, Stock Buzz) and Freddie Mac (FRE.N: Quote, Profile, Research, Stock Buzz).

“We have the biggest takeover in the history of the known world … and then we can’t trade. It’s terrible,” one trader said.

The Johannesburg Stock Exchange, which uses the LSE’s trading platform TradElect, also suspended trading.

“This halt today clearly has once again damaged (the LSE’s) reputation as a leading exchange, especially on a day like today, highlighting that it may have been unable to handle the volumes this morning,” added another trader.

But, it wasn’t actually the trading volume that caused the issue:

LONDON, Sept 9 (Reuters) – The London Stock Exchange’s (LSE.L: Quote, Profile, Research, Stock Buzz) failure on Monday was down to a software fault rather than high trading volume and has now been resolved, the exchange told Reuters on Tuesday. “It was software-related, a coincidence, due to two processes we couldn’t have foreseen,” a spokeswoman said.

“We’ve introduced a fix and we’re confident it will not happen again.”

She said the fault was not due to high trading volume.

What software stack runs the LSE? Windows 2003, .NET and Microsoft SQL Server. You may remember these ads:reliabletimes

Now, I doubt we’ll ever get any real details on what actually happened. There’s some speculation that an errant application upgrade may have been at fault. Five nines is really difficult to achieve though, and it seems to me that most times you see high profile installs like the LSE that go with a 100% Microsoft stack it’s Microsoft marketing and dollars that lead to the decision – not sound technical recommendations. The NYSE may be feeling a bit better about their recent decision to move to Linux.

–jeremy

Microsoft and Open Source

There’s some speculation that with Bill Gates’ departure from Microsoft will come a friendlier attitude toward Open Source. From the article:

Will Microsoft become more open to open source with the departure of Bill Gates?

It’s a tough call. Observers from both the open and closed source worlds say the exit of Microsoft’s longtime leader won’t usher in a GPL era at the company but it will likely accelerate what is already a changing attitude in Redmond.

“We already see quite a different approach to dealing with OSS and OSS companies from Sam Ramji’s group [which is] doing a great job in establishing dialog,” said Rafael Laguna, CEO of Open-Xchange and a former marketing exec at SUSE Linux. “With Gates’ departure, the only mammoth remaining is Ballmer. With him away in a near future, Microsoft will definitely open up. They have to.”

Gates’ exit will help acceptance of open source, another observer said.

“For much of Microsoft’s history, its primary strategic initiative has been Windows everywhere. Bill Gates was the primary architect of this and it has served the company well in reaching the $50 billion revenue mark. To get from $50 to $100 billion, however, they will clearly need to embrace the non-Windows world,” said Barry Crist, CEO, Likewise Software. “I suspect this will be easier for Microsoft to accomplish without Gates. We see substantive signs of this happening already.”

One open source backer hints that Gates’ early departure from Microsoft signals the beginning of the end for proprietary software.

“Bill Gates figured out how to harvest from software licensing early on in the game, and built the biggest software company on the planet from it. [But] selling software licenses has become a triviality,” said Juergen Geck, CTO of Openxchange, which competes against Microsoft Exchange.

Now, even with Bill still at Microsoft, the company has been slowly changing its attitude toward Open Source. It’s certainly been an internal struggle, and while some in the company are coming around some are still as averse to Open Source as ever. I maintain that the company will be unable to truly change until Ballmer steps down. The old way of thinking and acting it too ingrained into him and it permeates the decisions he makes. Even so, it’s great to hear a Microsoft rep say something like “We should have done it earlier” about Open Source.

While on the topic of billg, it’s a bit comical to see that even he had major usability problems with Windows.

–jeremy

ISO puts standard for Microsoft's OOXML document formats on hold

From Heise:

After member states filed four complaints against the standardisation of Microsoft’s Office Open XML (OOXML) document format, the International Standards Organisation (ISO) and the International Electrotechnical Commission (IEC) in Geneva have responded by postponing publication of the revised specification. As the ISO announced, the planned ISO/IEC DIS 29500 cannot be published until these complaints have been heard. Procedure requires that they be dealt with by the end of June, when the ISO and IEC have to hand over their comments on the complaints to two management committees for a final decision.

Brazil, India, South Africa, and Venezuela have officially filed complaints against the controversial certification of OOXML in expedited proceedings in Geneva. These emerging nations are concerned that no consensus was reached about which changes need to be made to the specification, which is more than 6000 pages long, during consultation on the numerous comments submitted at the end of February, after the first attempt to adopt OOXML as a standard failed in 2007. Specifically, they complained that concrete technical objections were not individually discussed .

The official press release:

Four national standards body members of ISO and IEC – Brazil, India, South Africa and Venezuela – have submitted appeals against the recent approval of ISO/IEC DIS 29500, Information technology – Office Open XML formats, as an ISO/IEC International Standard.

In accordance with the ISO/IEC rules governing the work of their joint technical committee ISO/IEC JTC 1, Information technology, the appeals are currently being considered by the ISO Secretary-General and the IEC General Secretary who, within a period of 30 days (to the end of June), and following whatever consultations they judge appropriate, are required to submit the appeals, with their comments, to the ISO Technical Management Board and the IEC Standardization Management Board.

The two management boards will then decide whether the appeals should be further processed or not. If they decide in favour of proceeding, the chairmen of the two boards are required to establish a conciliation panel which will attempt to resolve the appeals. The process could take several months.

According to the ISO/IEC rules, a document which is the subject of an appeal cannot be published as an ISO/IEC International Standard while the appeal is going on. Therefore, the decision to publish or not ISO/IEC DIS 29500 as an ISO/IEC International Standard cannot be taken until the outcome of the appeals is known.

It should be noted that this is not a directional change for the ISO. Their rules dictate that they have to postpone publishing the standard if any official appeals are made. Considering many of the countries originally filed comments that weren’t addressed, it’s very possible the ISO will decide not to process the appeals.

–jeremy

As the ODF-OOXML world turns

I’m a bit behind on this, but it’s a topic I’ve been covering for a while now so I wanted to follow up. First, from the the 451 group:

Oh the drama. Most of us knew ISO approval of Microsoft’s OOXML format was not the end, but more of a beginning in the ongoing fight for the future’s file format. Any doubts of that were put to rest this week with a flurry of activity around OOXML’s approval, ODF adoption, Microsoft’s support and the stance of U.S. states and other governments.

Much of it started with Microsoft’s announcement that it would expand its Office 2007 format support, including ODF. The move, which means Office 2007 users will be able to set ODF as their default file format, is further evidence of changes at Microsoft and the need to support multiple formats and interoperability. However, it still drew criticism from a number of ODF proponents/OOXML opponents, whose concerns include the typical Microsoft skepticism, but also center on the software giant’s OOXML approval campaign and previous statements downplaying the market for ODF.

We also saw further objection to ISO’s OOXML approval, primarily an appeal from South Africa. As format expert and saga watcher Andy Updegrove points out here, the appeal centers on the approval process and also on the ‘business basis’ for OOXML’s fast-track approval. Despite that relatively rapid approval, Updegrove points out that, ironically, Microsoft Office users will not have the opportunity to use the file format until Microsoft’s coming Office 14, expected in 2010 at the earliest.

Microsoft credited customer and government demand for its new found ODF love, but we also saw indications it may also involve difficulties in backward compatibility with OOXML. As ZDNet’s Tom Espiner points out, ‘The company now says OOXML support would require substantially more work.’ This comes as no surprise to many open source software users who have come to the same conclusion over the years. In fact, the inability of Microsoft to support different versions of its own Office and format software has fueled many OpenOffice.org downloads over the last few years, including my own.

Still, customer demand as the reasoning behind Microsoft’s ODF support was reinforced by yet another development in the ongoing format saga: findings from the State of New York. While the state’s officials indicated it would be a mistake to name ODF or OOXML as the standard of choice, New York’s format wonks did indicate that openness is the path to the future. That does not necessarily mean ODF, but it certainly makes it more likely given the controversy, uncertainty and drama still surrounding OOXML.

Since that post, Brazil and India have also decided to appeal. The deadline to appeal has now passed. The India post by Andy contains some good “what comes next” information for those that are interested. The appeals all have some items in common, but each also has points made only by that country. It’s clear that Microsoft did some very shady things during this process. It’s a sad indication that the company is still not willing to compete on the merits of its products on the one hand. On the other hand, they recently announced that Office 2007 would support ODF but not OOXML:

Microsoft today announced that it would update Office 2007 to natively support ODF 1.1, but not to implement its own OOXML format. Moreover, it would also join both the OASIS working group as well as the ISO/IEC JTC1 working group that has control of the ISO/IEC version of ODF. Implementation of DIS 29500, the ISO/IEC JTC 1 version of OOXML that has still not been publicly released will await the release of Office 14, the ship date of which remains unannounced.

So they fast track an office format while a competing one already exists, push it through the approval process using tactics that are questionable at best and then decide to only implement the competing standard in the current shipping product. You couldn’t make this stuff up. It’s clear that the internal battle within Microsoft is still raging. Part of the company really want to change, but part of it really doesn’t. It remains to be seen which side will prevail, but it’s not difficult to see why many in the Open Source community remain wary.

–jeremy

Ozzie: Open Source a more disruptive competitor than Google

I’ve often said that for Microsoft to truly change, Ballmer will have to go. On the other hand, Microsoft should be clinging to some other top level execs with a kung fu grip. Ray Ozzie is one of those execs. The vision and leadership he’s shown over his career is exceptional. He gets it. With that in mind it wasn’t a real surprise to hear him say this:

Google has nothing on open source when it comes to potential competitive threats to Microsoft, according to Redmond’s Chief Software Architect Ray Ozzie.

Ozzie fielded a number of questions on his role at Microsoft and the company’s evolving technology strategies during an appearance at the Sanford Bernstein Strategic Decisions Conference on May 28. (I listened to his session via the Webcast.)

Ozzie reiterated that it often takes a strong competitor to truly galvanize Microsoft.

“Microsoft has built up a culture of crisis,” Ozzie told conference attendees.

Competitors like his former employer, Lotus, and now, Google, have spurred the company to make changes to its business to stay ahead, Ozzie said. But while Google is a “tremendously strong competitor,” Ozzie acknowledged, “open source was much more potentially disruptive” to Microsoft’s business. (He noted that, unlike Google, many open-source programmers aren’t beholden to shareholders.)

Ozzie said that competing with open source “made Microsoft a much stronger company.” He cited changes Microsoft has made to its business model — such as focusing on making its closed-source software interoperable with open-source products — as directly attributable to that competition.

You see, Google is a company… and Microsoft knows how to compete with companies (although they are proving completely unable to compete on the web, despite both huge efforts and large amounts of cash). Open Source is a movement, and that concept is proving troublesome for many at Redmond. Keep in mind that in my opinion Google would never have been possible without Open Source. Open Source enables companies like Google to exist, and that’s really powerful. It’s literally changing the rules of the game.

So why is Ballmer still in charge? I’m not sure. I thought the failed Yahoo! blunder may be enough to do him in, but it looks like that isn’t going to be the case. In a way, I guess many of us in the OSS world should be happy. The longer he’s around the more time we have to mature and hone our products and skills. It’s hard for a behemoth like MSFT to turn around, but once they do – look out.

–jeremy

Microsoft Walks Away from the Yahoo Deal

Unless you were in a cave over the weekend, I’m sure you’ve seen that Microsoft has walked away from its 40B+ Yahoo acquisition attempt. I’ve largely avoided the topic, but do have some commentary now. Note that many people think this is just a posturing attempt by Microsoft and that’s entirely possible. First let me say that I think the merger would have been spectacularly bad for Microsoft. The cultural and integration issues alone would have been nearly unsurmountable. Would the mail portion of the deal even have gotten regulatory approval? How many high profile departure would you have seen? How many projects that really give Yahoo much of its street credibility would have been crushed? I’m not sure that Flickr, delicious, Zimbra and many others would have gone to Microsoft given the choice. That being said I think the deal would have been bad for Yahoo as well. Microsoft has had a terrible track record on the web and has multiple cash cows to protect. In the end the only way I saw the deal being feasible would be if Microsoft spun things out into a fully autonomous company. I didn’t see any indication that was going to happen.

On to Ballmer, I really think this underscores the fact that he needs to go if Microsoft is going to turn itself around. He seemed to have no coherent plan here. It almost seems if he woke up one day really wanted Yahoo and just didn’t think it through. Microsoft wants to compete with Google so bad they seem to be getting irrational. It’s clear they can’t do this organically, but I really don’t think Yahoo was the answer.

Next come the shareholders. There’s already a ton of speculation that this will result in shareholders lawsuits. To me that makes no sense for a couple reasons. First, as a shareholder it will distract the company and further drive down the price of the stock. The more tragic part though is the current state of the street. Everyone is so concerned with the next days closing price that very few people take the long view anymore. Unless you’re day trading, if you invest in a company you should be looking at the long term. That means trusting management. IMHO shareholder lawsuits should be reserved for gross negligence and other egregious acts. We remain far too litigious and it’s going to come back to haunt us. FWIW, the stock currently sits in the mid-24 range, which makes it down about 12%. That’s not nearly as bad as some people were speculating. MSFT is up mildly.

On to morale. Most people within Microsoft seem to be happy about the deal falling through. Many jobs have been saved and they get to keep their $43B cash horde. This happiness may wear off as soon as they realize they still are not effectively competing in the space, but with that much cash they should be able to figure something out. Things aren’t as clear at Yahoo. Yang and co are clearly happy, but the rest of the staff seems to have people on all sides of the equation. It will take Yahoo having a couple very good quarters or making a really compelling announcement for that to change if I had to guess. It’s been a long few months if you work at YHOO.

So were do things go from here? There has been talk of Yahoo grabbing AOL. I can’t see that making any sense, but let’s hope Yahoo doesn’t do it just to look like they’re making moves. MySpace seems a little more reasonable. I also see reports that Yahoo should buy back a bunch of stock. At first glance that makes a ton of sense, since the board clearly thinks the stock is way undervalued at the moment. With only $2.5B or so in cash though, they won’t be able to make a big enough dent to really make it worth while. The money could almost certainly be spent better elsewhere.

Some additional thoughts:
* This deal would have been really bad for Open Source. Zimbra is the first thing that comes to mind, but Yahoo does more in the Open Source space than they get credit for.
* It looks like Bill Miller and a couple other huge holders would have gotten behind a deal in the $35 range. If Microsoft really wanted the company, they almost surely could have had it.
* It will be interesting to see if Yahoo moves forward with the Google outsourcing, or if that will prove to simply have been posturing.
* Yahoo must have made it really clear that if Microsoft went hostile, that they would poison pill themselves to death. We don’t get too many of these in our industry and Yahoo is actually setup poorly to defend against a proxy fight, since everyone comes up for election at once.

Additional reading:
Kara
NYT
“The distraction of Microsoft’s unsolicited proposal now behind us”

I’m sure I’ll have more thoughts on this as it unfolds.

–jeremy

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