Summary: Why Microsoft will not manage to grab yet another Internet giant, not any time soon anyway
CONSOLIDATION sounds like a nice word, but usually it means removal of choice and that’s not necessarily a good thing. Microsoft has already eliminated the second search engine in all sorts of nefarious ways. Microsoft never bought Yahoo! It just achieved a sort of hijack from the inside. The company is now run by many former executives of Microsoft.
Well, one reader from Brazil told us about reports like this one yesterday:
AOL Inc. and several private-equity firms are exploring making an offer to buy Yahoo Inc., according to people familiar with the matter, devising a bold plan to marry two big Internet brands facing steep challenges.
Considering rumours/speculations that turned out to be false regarding Adobe takeover, Nokia takeover, and even AOL [1, 2, 3], it’s probably a case of boy crying “Wolf!”
Microsoft cannot afford to buy anything significant anymore (it would require borrowing more money), so for anything significant to happen here is unlikely unless the takeover is indirect. As Cringely put it:
If you think AOL actually intends to buy Yahoo, you are wrong. That story hit the press this week but it’s a ruse to motivate Google exactly as I explained a few days ago. AOL has neither the money nor the motivation to buy Yahoo, which is analogous to a bus company buying a poorly-managed airline. AOL just wants to make Google jealous.
In other Yahoo! news, it’s harmed by Google’s Instant despite revamp attempts. Is Yahoo! still developing a search engine? Why bother anymore? Won’t Microsoft just devour the whole thing?
To Microsoft, Yahoo! is just a tool now, just like SCO was once a tool. Now it’s just dead:
SCO’s stock is now back up to 7 cents, up from 2 cents or maybe less — I don’t track it closely — and 7 is where it’s been hovering most of the time for the last few months. Do people really make money from these little dips and surges? What a life that must be. That is actually a fraction of a penny higher than the stock sold for on the day SCO filed for bankruptcy. Go figure.
There’s a long list of companies that ended up as corpses outside Microsoft’s lair. Which one will Microsoft exploit next? █
“On the same day that CA blasted SCO, Open Source evangelist Eric Raymond revealed a leaked email from SCO’s strategic consultant Mike Anderer to their management. The email details how, surprise surprise, Microsoft has arranged virtually all of SCO’s financing, hiding behind intermediaries like Baystar Capital.”
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Summary: A reality check amid rumours that Microsoft may be interested in Adobe’s assets and more bad news about Vista Phone 7 [sic]
Due to some reports like this one, people have begun to speculate that Microsoft might buy Adobe, which is extremely unlikely for reasons that were brought up in IRC. If Microsoft ever thought about buying Adobe, then it confirms yet again it has an identity crisis (as new internal documents appear to suggest). The article from the New York Times begins as follows:
Steven A. Ballmer, Microsoft’s chief executive, recently showed up with a small entourage of deputies at Adobe’s offices to hold a secret meeting with Adobe’s chief executive, Shantanu Narayen.
The meeting, which lasted more than an hour, covered a number of topics, but one of the main thrusts of the discussion was Apple and its control of the mobile phone market and how the two companies could team up in the battle against Apple. A possible acquisition of Adobe by Microsoft were among the options.
Microsoft has been poaching Adobe employees for a while, it has products that compete directly with Adobe (hello redundancy and antitrust), and it does not have money to buy Adobe. These are just some of the many reasons why an acquisition is not going to happen. Rather than Microsoft growing through stealthy deals it appears as though it may shrink by splitting up, just like it was supposed to after antitrust violations in the 90s. Such a ‘radical’ suggestion came from Goldman Sachs a few days ago and here it is in the news again:
Goldman Sachs, at one time the most respected Wall Street investment bank in the world, is urging Microsoft to shed its Xbox (and the entire entertainment division, actually) branch into its own company, and for Microsoft proper to just focus on the business, operating system and office software stuff.
Goldman Sachs has also expressed dissatisfaction with Microsoft’s next attempt at the mobile market. It was not alone. As IDG puts it:
Windows Phone 7 Buzz Muted by Naysayers
In fact Microsoft is facing a wall of naysayers leading up this Monday when it will introduce its first batch of Windows Phone 7 phones. Analysts and investors are wary about Windows Phone 7′s prospects. Third-party application developers are giving mixed reviews about the new smartphone platform. And average Joes and Janes are just making wisecracks.
Here’s a look at what people are saying about Microsoft.
Market research firm Gartner on Wednesday predicted that Microsoft’s forthcoming Windows Phone 7 will not buoy the company’s sagging mobile handset fortunes. Instead, Gartner predicts, Microsoft’s global market share will drop from 4.7 percent in 2010 to 3.9 percent by 2014, according to Information Week.
Gartner’s prediction follows Goldman Sachs downgrade of Microsoft’s stock on Monday from “buy” to “neutral.” The investment firm dinged Microsoft for its failure to gain “a firmer foothold in the growing migration to mobile devices,” according to Bloomberg.
It’s not hard to see where that criticism comes from. Apple’s iPad, for example, has become the tablet device to beat and inspired a slew of competitors, and this has all happened in less than a year. Microsoft, meanwhile, has been trying to inspire tablet PC adoption for years without much success.
It may not take long for Vista Phone 7 to die and join this list, at which point buyers of such phones will be greeted by messages like this one:
Customers can continue to enjoy the full benefits of MSN Direct, along with service and support, up until that date. Pro-rated refunds for unused portions of existing One-Time Payment and 12 month subscription plans will be automatically credited after January 1, 2012. Customers may cancel service at any point prior to that date and receive a pro-rated refund for any unused portion of their subscription. Microsoft customer support is available to answer any questions about existing subscriptions or refund eligibility at 1-866-658-7032.
Why would Microsoft bury about 40 products only to spend ~15 billion dollars buying Adobe (the company’s market cap is around $14.3 billion at the moment)? Microsoft hardly even makes acquisitions anymore. It just makes no sense. █
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Summary: The vast majority of Windows Live Spaces is about to get wiped out, according to a source familiar with those matters
Windows Live Spaces became a notorious spam trap, as pointed out by blogs over the past year or so. Microsoft was a very poor steward, so the whole network got filled with splogs and other rubbish. Microsoft is playing loose with the numbers when it claims that 30 million users exist in Windows Live Spaces, which will be shifted to GNU/Linux in another company [1, 2, 3] so that Microsoft can shut down its own service. Based on this post with some statistics, only about 1% of Windows Live Spaces will actually be active, so it’s natural to assume that 99% (or about 29.6 million of those 30 million users which Microsoft claims to have) won’t even bother migrating to another service. Their blogs/splogs will die permanently within months.
Windows Live Spaces’ shutdown may not be a big win for WordPress.com, after all. According to internal e-mail messages obtained by Betanews, Microsoft expects only about 1 percent of Windows Live Spaces bloggers to move to WordPress.com. If not there then where? In the e-mail exchange, one Microsoft executive asserts about the 30 million active Windows Live Spaces blogs: “Most are dead.”
As MinceR put it earlier today, Microsoft is “where projects go to die”. It’s also where blogs come to die. One blog from Windows Live Spaces — and one that we are particularly interested in — belongs to the man behind Microsoft’s highly unethical tactics. He wrote about them in Windows Live Spaces and we covered these back in 2008. Just in case he does not migrate his blog (it’s not maintained anymore based on the amount of comment spam), we are going to keep a copy. To quote him: “To be profitable, the platform must not only dominate its market, but also be defended from cloning. Anti-cloning defenses include patents and rapid evolution. Maintaining the platform’s anti-cloning defense must also be cheap, relative to the platform’s revenue, else the cost of defense will consume the platform’s potential profits.” Well, somebody tell that to fans of Mono. █
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Summary: A German tabloid publishes a speculative piece about a Microsoft acquisition of Nokia
“From the rumour mill,” writes a reader of ours, “Bild.de, Germany’s largest tabloid, is speculating that Micro-Soft will swallow Nokia.” Our reader translates that as “Nokia: the fall of the Mobile giant – now a takeover by Microsoft is looming” and for context see our recent very posts about Microsoft in Nokia:
This would make little sense as Nokia can get almost nothing out of Microsoft*, which has problems with growing debt and lack of acquisitions — a shocking observation that it struggles to deny. █
*The same goes for Blackberry (RIM), which now embraces (exploits) some Free/open source software and for the Playbook uses QNX, based someone who reports that “the company announced the BlackBerry Tablet OS, which will power the Playbook. The OS is built on the QNX architecture, which the company touts as one of the most “reliable, secure and robust” architectures.”
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Professor Milo, Batman: The Animated Series
Summary: Project Milo (KINect) has been killed by Microsoft’s Lionhead Studios, according to unconfirmed reports
Dead products at Microsoft are a couple a month, on average. Microsoft has been cutting down expenses by ending many products and closing down divisions for a few years now, leaving the profitable ones in tact and giving more time to losing products, hoping for some reversal or cross-product leverage (e.g. Zune being used as a tool/means to lift Xbox). The latest dead product from Microsoft is poor Milo, which is said to be canceled although Microsoft cannot confirm this just yet. To quote one report among many:
Kotaku’s reporting that the plug’s been pulled on Lionhead Studios’ ambitious Project Milo for Kinect. The undertaking–also referred to as Milo & Kate–was the jewel of Microsoft’s 2009 E3 presentation, containing the most forward-looking of the motion-gaming ideas during the press conference.
Some sites talk about it as though it’s a fact and some reserve judgment, instead just asking, “‘Milo & Kate’ scrapped by Microsoft?”
Other sites attribute to the source of the claim or call it a “rumor”.
There is this one contradictory report and having had its KINect product trashed, Microsoft too is mocking the competition to hide its own failings. It’s not a winning strategy and it leaves Nintendo in a stronger position. █
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Jobs image licensed under the GNU Free Documentation License (version 1.2 or any later versions); Ellison patch By Thomas Hawk
Summary: Rumours and speculations that Oracle might prepare to buy ARM Holdings may arouse the suspicion that Android is Ellison’s target
OIN has added Mozilla as a licensee and pro-GNU/Linux bloggers keep talking about it. One person remarked:
I hope OIN is good for Mozilla, but what about Oracle? #swpats
The troubling thing is that despite Oracle and Google both being inside the OIN shield zone, Oracle decided to sue Google using software patents [1, 2, 3, 4, 5, 6] and interestingly enough, as Groklaw points out, they are assigned the same judge as in the Apple vs. Psystar case.
Google has appeared in the Oracle v. Google litigation and they have extra time to file an answer to Oracle’s complaint. Meanwhile, they’ve added some more lawyers to the team and informed the court they decline to have the case handled by a magistrate judge, so it’s been assigned to the Hon. William Alsup. What are the odds? That’s the same judge who presided over the Apple v. Psystar case.
Previously we found rumours that Apple would buy ARM (reported less than a year ago in many news outlets) and also learned that Steve Jobs’ friendship with Larry Ellison might have something to do with the legal attack on Android [1, 2, 3] (Apple is also suing Android using software patents). Right now there is news suggesting that Oracle — not Apple — might buy ARM Holdings, which recently signed a deal with Microsoft.
ARM Holdings Plc, the U.K. designer of chips that power Apple Inc.’s iPhone, rose the most in two weeks in London trading after Oracle Corp. Chief Executive Officer Larry Ellison said his company may buy a chipmaker.
ARM rose as much as 6.8 percent to 417.5 pence, and traded up 6 percent to 414.4 pence as of 12:19 p.m., valuing the company at about 5.47 billion pounds ($8.6 billion).
“We primarily think this is about Ellison,” said Lee Simpson, an analyst at Jefferies Intl Ltd. in London, adding that the “Oracle speculation is unwarranted” and that the company would more likely target an enterprise-focused chipmaker such as Advanced Micro Devices Inc.
Has Oracle not gotten enough from Sun’s SPARC? Back when it was rumoured that Apple would buy ARM people said that it can be seen as an attack on Android. Could the strong friendship between Ellison and Jobs play a role here? As pointed out some hours ago, collusion of this kind if a lot more common than people dare to imagine. █
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Summary: Analysts take a close look at Microsoft and they don’t like what they see; Microsoft is apparently trying to hide losses by merging units; alleged Microsoft employees are suggesting that more layoffs are weeks away
MICROSOFT’S financial situation is somewhat of a misunderstood subject because the company has debt and despite bragging about huge profits the company has vapourised a lot of its cash reserves. Under Ballmer’s reign or era the company lost about half its value (Microsoft would rather people evaluate it by its stock alone). Microsoft’s GNU/Linux-hostile COO Mr. Turner is dumping his Microsoft shares and despite some recovery in the stock market (see Red Hat’s performance for example) Microsoft’s performance remains rather abysmal:
Microsoft, down about 22 percent this year, is a profit powerhouse. In its last fiscal year that ended in June, it posted a 40 percent pretax profit margin and a return on stockholders’ equity of 44 percent.
That’s what Microsoft says, but there are more sceptical people out there.
“[T]he shell game of hiding loses, moving divisions around that are losing too much money (Kin)”
–Chips B. MalroyMicrosoft thinks that Microsoft is cheap and some people went along with this type of headline (we found two examples), implying that Microsoft is about to surge. Well, on what basis exactly? A current/former Microsoft shareholder suggests dumping the stock. The company’s financials are not so impressive (buybacks imminent) and Microsoft has debt (last covered last week and therefore not worth repeating).
“Jefferies & Co. said Microsoft Corp. could borrow up to $4.5 billion,” according to two separate articles from last week [1, 2]. The latter says “Jefferies Thinks Microsoft Could Borrow $4.5 Billion” (Microsoft has already borrowed several billions).
Mary Jo Microsoft has just revealed that Microsoft may be using the old trick of merging unrelated businesses so as to make all divisions look profitable. We saw Microsoft doing this several times before. This time it’s a huge stretch because Microsoft tries to merge embedded (failing) with server and tools (successful). This way, according to our reader Chips, the failure will be hidden away in a bigger bucket. It’s “the shell game of hiding loses, moving divisions around that are losing too much money (Kin),” he explains.
There’s some odd reorg-related news coming out of Microsoft today, September 20. The company is announcing that it is moving its Embedded business into the Server and Tools unit.
I had been assuming Embedded might end up as part of Windows client or maybe as part of the Mobile Communications Business (since Microsoft’s Mobilebusiness is one of the biggest — though not the only — OEM for the various Embedded division products).
This is worse than the Microsoft blog makes it seem (we have not yet identified any proper analysis of this). But it gets worse. After some recent downgrades and the like from a Standard & Poor’s analyst and from Credit Suisse Microsoft takes another couple of hits. “FBR cuts Microsoft profit view” says this report which expands as follows: “FBR Capital Markets lowered its profit estimates for software giant Microsoft Corp due to softening consumer demand for PCs.”
“[O]nly seen about 3 comments new on Mini msft about layoffs, maybe in Oct.”
–Chips B. Malroy“Morgan Stanley Cuts Estimates on Microsoft Corp.’s Slower PC Sales” says another report, just one among several. This cannot be good. It means that Microsoft’s upcoming results will not impress (even it they beat already-lowered street expectations, as usual because it’s easy to assure).
Chips B. Malroy says that he has “only seen about 3 comments new on Mini msft about layoffs, maybe in Oct.” That’s the blog where many anonymous Microsoft employees comment. Have any other readers noticed something about layoffs that are coming next month? Microsoft has had many rounds of layoffs in recent years because it's moving overseas to cut costs. This often means that the quality of products is reduced, not just working conditions and wages.
To repeat what was said at the start, Microsoft lost about half its value over the past decade (mostly under Ballmer’s management) and one item of news says: “That’s right, Microsoft is nearly $170 billion cheaper today than it was a decade ago. That’s an eye-popping discount. Of course, there are plenty of stocks that have gone backwards during the past 10 years, however, most are just a shadow of their former selves.”
Microsoft’s market cap is well behind Apple's and in terms of brand value Microsoft is not doing so well, either. Its position fell over the years [1, 2, 3, 4, 5]. This is one of the more Microsoft-friendly ladders and in this specific one “third place is still occupied by Microsoft, the software giant.” In some other surveys/ladders of this kind Microsoft is doing much worse (the UK one/s being the exception).
Here is a fascinating observation that we found. It just states the obvious:
It’s to assuage worries that too much of MS’s value is held overseas, resulting in tricky taxation situations. More than anything else this confirms one thing: Despite its PR, MS isn’t in the business of serving consumers … it’s a money-making machine.
“Why Apple Beats Microsoft At Change Management” says this headline from Forbes and although we spend no time comparing Microsoft to Apple (it’s the wrong comparison to have when we really deal with software freedom versus proprietary software, not brands), Chips B. Malroy insisted on pointing out (twice even) that Apple’s hypePad (and to some extent Google Android too) is causing huge damage to Microsoft sales. █
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Summary: As loads of security problems occupy the world of Windows, Microsoft resorts to seeking help from security firms it competes with and more botnets thrive nonetheless
Microsoft is having a tough month dealing with many security problems caused by its own weaknesses. This post is a quick accumulation of some issues from the past 2 weeks.
Earlier in the month we wrote about the ‘Here You Have’ virus, which got a lot of news coverage [1, 2, 3]. It was politically motivated:
THE HACKER claiming credit for the ‘Here you have’ Trojan, written as a blow against the invasion and occupation of Iraq, might be located in Spain.
Cisco says that this virus caused brief havoc. It affects everyone to a certain extent.
Stuxnet is real bummer which we covered in [1, 2, 3, 4, 5, 6, 7, 8, 9]. “Holes used by the Stuxnet worm remain in Windows XP,” said this recent report (there are more) and it is exploiting zero-day flaws. Microsoft liaises with Kaspersky in hopes of tackling this problem. Eventually some patches arrived [1, 2, 3, 4] but only after a lot of damage had been done. It turns out that Symantec — not just Kaspersky — helped Microsoft here:
Microsoft has credited security partners at Kaspersky Lab and Symantec for helping to close a critical Windows vulnerability that was being exploited by a sophisticated worm that has attacked industrial plant
Earlier this month Symantec created a tie-up with Microsoft’s Fog Computing [1, 2]. Then came speculations that Microsoft was looking to buy Symantec. It was just a rumour (likely false), but investors took it seriously and Symantec surged [1, 2, 3, 4, 5]. The stock being driven up like this may always lead to suspicion that someone spread the rumour just to make money in a short-term period. That’s illegal of course and the SEC should keep an eye open.
Speaking of acquisitions by Microsoft, “PopCap Rejected $5 Million Microsoft Buyout” says this one report among many more [1, 2,
3]. This one says that “Microsoft tried to convince PopCap it was only worth $5 million, but the studio didn’t believe it.” To quote another item, ‘During an interview with Develop, Jason Kapalka, creative director at PopCap, explained how even Microsoft tried to buy them, but the offer price was a joke: “We had a couple of funny instances in the early years of PopCap where we were talking to Microsoft about a possible acquisition – I think it was in 2002 – and they sat us down and gave us this long speech about why our company was worth 5 million dollars, at a time when we had four million in the bank.”‘
Back to insecurity, an older rogue antivirus attack gave trouble to Windows users this month [1, 2, 3, 4, 5]. It’s a form of malware. In an operating system where antivirus software is not necessary, this would hardly be an issue.
Microsoft is acknowledging that there is a security problem with ASP.NET, as mentioned here last week.
Microsoft has released a security advisory about a vulnerability affecting Web applications built on ASP.NET.
Here is another article about it.
It’s already being exploited, based on today’s reports:
Attackers have begun exploiting a recently disclosed vulnerability in Microsoft web-development applications that opens password files and other sensitive data to interception and tampering.
The vulnerability in the way ASP.Net apps encrypt data was disclosed last week at the Ekoparty Conference in Argentina. Microsoft on Friday issued a temporary fix for the so-called “cryptographic padding attack,” which allows attackers to decrypt protected files by sending vulnerable systems large numbers of corrupted requests.
Now, Microsoft security pros say they are seeing “limited attacks” in the wild and warned that they can be used to read and tamper with a system’s most sensitive configuration files.
There are many new stories about malware, such as:
i. Report: More Than 1 Million Web Sites Serving Malware in Q2 [via]
Web anti malware firm Dasient has published data claiming that more than 1 million Web sites were compromised in the second quarter, 2010 – a sharp increase.
More than one million Web domains were infected with malicious code in the second quarter of 2010 – around one percent of all active Web domains, according to data released by Web security firm Dasient, Inc.
ii. Pirate Bay beset by tainted ads
The tainted ads exposed visiting surfers to Windows Trojans via drive-by download attacks. Pirate Bay has experienced similar problems in the past, and it’s unclear how long it will take to clear up the latest issues.
iii. Study: 33% of SMBs Have Been Infected With Malware From Social Networks
About one-third of small and medium-sized businesses have been infected with malware from social networks like Facebook and Twitter, according to a recent study released by Panda Security, a company specializing in cloud security.
iv. Windows malware dwarfs other viral threats
The vast majority of malware – more than 99 per cent – targets Windows PCs, according to a new survey by German anti-virus firm G-Data.
G-Data reckons 99.4 per cent of all new malware of the first half of 2010 targeted Microsoft’s operating system. Just 0.6 per cent of the 1,017,208 new malware programs discovered in 1H2010 targeted other systems, such as Apple Mac boxes and servers running Unix.
When one in two Windows computers is said to be a zombie PC, there is clearly a problem, especially when it goes on for years, still unresolved. Some of the latest Windows botnets stories are:
i. A botnet for hire springs up
Insecurity outfit Damballa revealed that the creatively named IMDDOS (I’m DDoS) botnet can be hired out as “pressure test software” by those who are willing to cough up some cash and download an application. The application is little more than dialogue box allowing the user to point the botnet to a particular IP address and port number and start hitting it with spurious requests.
ii. Microsoft Helps Cox Identify Infected Computers
iii. Microsoft gets legal might to target spamming botnets
iv. Microsoft gets superweapon for fighting botnets
Internet Explorer 8
The very latest version of Internet Explorer is still not so widely adopted because of Microsoft’s hostility towards the Web which it still cannot reverse. Here is the latest vulnerability in Internet Explorer 8 [1, 2].
Late last week, a security flaw in Internet Explorer 8 was publicly disclosed to the Full Disclosure mailing list. The flaw allows attackers to steal private information from online services such as web mail and Twitter, allowing attackers to, for example, delete e-mails or send tweets from their victims’ accounts.
“Microsoft Exchange opens the door for hackers,” says The Inquirer.
FIRMS RUNNING Microsoft’s Exchange mail server could find that users of its Outlook Web Access (OWA) software have their sessions hijacked.
A security vulnerability in Exchange Server 2003 SP2 and Exchange Server 2007 SP1 and SP2 means that attackers can take control of a user’s OWA session and issue commands up to the level permitted by security controls without the user knowing. OWA is a rich ‘web mail’ client that is offered by Exchange Server and has the look and feel of Microsoft’s standalone Outlook software.
According to this, a well-selling Linux phone (not Ballnux) suffers from its reliance on Exchange.
There are rumors that the possible technical problem with the Microsoft Exchange is causing the delay of Android 2.2 Froyo push to Motorola Droid X devices. Multiple news outlets including Droid Life has confirmed the news.
Who needs Exchange anyway? It’s just a brand. Android can do better than that and also avert the security problems. █
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