Forbes Asks Jay Bhatti – What Microsoft Could Do For Yahoo! Employees

The Yahoo! Deal
What Microsoft Could Do For Yahoo! Employees
Wendy Tanaka04.11.08, 6:30 PM ET – PDF VersionLink to Article

Despite the flurry of activity from background players in theYahoo!Microsoft deal saga this week, many industry watchers still believe that the software giant may well prevail in its campaign to acquire Yahoo!. And typically, when one industry titan swallows another, job losses follow.

So should Yahoo! (nasdaq: YHOO – news– people ) employees be working on their résumés?

In this case, maybe not.

To achieve the promised “cost savings” that executives like to forecast when they’re acquiring a company, layoffs do often follow. In a late February speech at a Goldman Sachs (nyse: GS – news people ) investment conference conference, Microsoft (nasdaq: MSFTnews – people ) Executive Craig Mundie conceded that job losses would likely follow a Microsoft-Yahoo! combo. “The reason we think there’s synergies, actually, even in the R&D side, is that there’s a lot of redundant development going on,” Mundie said.

“The search engines are both being developed right next to each other in two different companies, and many other components, the whole advertising system. Every one of these things is being redundantly developed by two groups of very, very smart people. At the end of the day, you don’t need both. There may be great components from the two of them, and over time you could smoosh them together, but there’s a lot of fungibility in that part of the investment.”

But not all those losses are likely to happen in Sunnyvale, say industry watchers.

Microsoft’s primary reason for buying Yahoo! is to combine forces and go head-to-head with Google (nasdaq: GOOG – news – people ) in the burgeoning online advertising market. That means Microsoft will have to handle the Sunnyvale, Calif., Internet portal’s workers with kid gloves if it wants to keep top talent and ensure a smooth integration of the two companies. “If Microsoft is going to treat Yahoo! people as second-class citizens, a lot of good people will leave,” says Kiumarse Zamanian, a former Yahoo! advertising executive.

In Yahoo!, Microsoft is gaining a tremendous asset: the world’s premier consumer Internet portal with 500 million visitors a month. “This is not a traditional acquisition. Microsoft needs to tread lightly,” says Burton Group analyst Ken Anderson. “They’re going after something more valuable than acquiring market share–Yahoo! is considered one of the most successful Internet start-ups.”

Indeed, Microsoft’s attempts to create blockbuster consumer and media properties through its MSN division have failed. “Microsoft is an engineering company. They don’t know how to sell ads,” IDC analyst Karsten Weide says. “What drives this business is media, understanding what advertisers and consumers want.”

While Yahoo! gives Microsoft a bounty of media and consumer assets, the software giant’s aggressive business style can capitalize on them, something Yahoo! couldn’t do. “It’s a Microsoft-run Yahoo!,” Anderson says. “Microsoft is very aggressive in how they run a corporation.”

So it’s Microsoft’s portal employees, not Yahoo! workers, that should be worrying about their jobs. “If I am an MSN online guy I’d be a little nervous,” Anderson says.

Jay Bhatti, co-founder of search engine start-up Spock and a former Microsoft product manager, still keeps in touch with workers in Redmond–and more than a few are concerned about their future. “A lot of people who work at MSN are saying, ‘What’s going to happen to us?’ ” Bhatti says.

Nevertheless, Microsoft’s bid for Yahoo!, announced Feb. 1, has created fear and loathing in the ranks of both companies. Since the announcement, Bhatti says the number of résumés Spock has received from Microsoft and Yahoo! workers has tripled. To shore up lackluster financials, Yahoo! laid off 1,000 of its 14,000 workers in February.

Even though Microsoft has said it will keep the Yahoo! brand after the acquisition, some aren’t convinced Chief Executive Steve Ballmer and his gang will stick to their promise. Zamanian, the former Yahoo! ad executive who is now vice president of Glam Media’s advertising platform, notes: “There’s a joke: What do you get if you merge Microsoft and Yahoo!? Microsoft.’ “

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