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The Way Business Is Moving

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Issue Date: December 2008

Microsoft, Qi Lu, and the future of online services

December 2008
David Mitchell, Ovum analyst

It emerged last week that Qi Lu had been appointed as president of Microsoft’s online services business. Qi Lu was previously vice president of engineering services at Yahoo’s e-commerce and search business. He will begin his new role early in the new year, reporting to Steve Ballmer.

There is no doubt that the appointment of Qi Lu to Microsoft would make the integration of Yahoo substantially easier. He would bring a detailed understanding of the talent, cultures, and business processes of both sides to the table, although he would need some time to settle down in Microsoft before this ability would be at its maximum.
One of the major concerns about any Microsoft-Yahoo acquisition, either a complete acquisition or a search-asset-only deal, would be whether the integration could properly be achieved without key staff turnover increasing, cultures clashing, and innovation stalling. Bringing Qi Lu onto the Microsoft staff significantly reduces that risk.
Even if a Microsoft-Yahoo deal does not make a comeback, Qi Lu is still a very significant hire for Microsoft, bringing substantial experience and talent to the table.
Since the abortive attempt by Microsoft to acquire Yahoo, many things have changed. To begin with there has been a substantial decline in the Yahoo share price, with a 52-week low of $8,94. This is a stunning decline compared with the 52-week high of $30,25. The rapid decline makes the original Microsoft offer appear significantly attractive, in hindsight.
Secondly, last month saw the resignation of the Yahoo chief executive Jerry Yang. Many in the market were highly critical of Yang’s handling of the Microsoft acquisition attempt and the lack of a substantive alternative that would have generated higher shareholder returns.
Finally, there has been increased market speculation that a wider change of control may be on the cards at Yahoo, with the market investor Carl Icahn having raised his stake in the company to 5,5% having become a director at Yahoo earlier this year, subsequent to the threatened proxy director battle. Former AOL chief Jonathan Miller is being identified as a potential bidder.
As the market decline continues to strike home, there is an increased focus on the potential turnaround effect that key senior talent can bring to companies in the same way that struggling soccer teams look to their star player to score important goals. While the senior talent issue is important, there are some companies where the issues are so structural and intractable that more than top talent is required.
Senior talent moves in the past two months have included the ex-Oracle executive John Wookey moving to SAP as EVP of large enterprise on demand, the departure of Rich Green from Sun Microsystems, the aforementioned resignation of Jerry Yang, the MySpace Music appointment of MTV executive Courtney Holt, the retirement of John Thompson from Symantec, the appointment of ex-Salesforce.com Matt Stodolnic to Hyperic, the move of Mark Papermaster from IBM to Apple, and many more.
Of course, the forthcoming appointment of a CTO to the Obama presidency will be one of the ultimate senior technology roles in the next 10 years.
Source: Computergram


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