Tellme: happily conquered by Microsoft

The AP published a story on Friday about the reportedly happy integration of one of Microsoft's acquired companies, Tellme, bought for about $800 million 10 months ago. Or maybe it is more accurate to say the happy NOT integration. Tellme makes voice automation software used by directory assistance and other voice-controlled services.

AP's point with the story was that Tellme's culture was not annihilated after the merger but was left alone, Tellme's founder Mike McCue said. Therefore, the AP concludes, looks like Yahoo can expect the same. (Microsoft has promised to retain the Yahoo culture.)

But there's a key paragraph in the story that can give any reader an easy between-the-lines message. McCue, who was employed by Netscape during the years Microsoft suffocated it, was not interested in selling out to Microsoft. But then Steve Ballmer flew McCue to Seattle and he changed his mind:

"After being assured that Tellme would be able to retain its Silicon Valley office, identity and quirky culture, McCue negotiated an $800 million sale to Microsoft and agreed to stay on as general manager. It's a decision that he says he doesn't regret 10 months into the marriage."

Yeah, $800 million ought to do it.

The story recounts how Tellme's engineers had a sit down brainstorming talk with Bill Gates which couldn't fail to make them happy (in that brush-with-fame sort of way). Plus, despite a thick layer of bureaucracy imposed under Microsoft ownership, the Tellme culture is preserved right down to the scooters employees use to travel through their warehouse office space, McCue says.

But the AP story has it wrong when it concludes that this bodes well for Yahoo. It doesn't mean a thing for Yahoo. Microsoft wanted Tellme for its new technology. Therefore Tellme's talent could expect a loving hands-off treatment (if the AP story is to be taken at its word.) Microsoft's interest in Yahoo isn't so benign (for Yahoo or for Google). No doubt, Microsoft will want to keep the best of the Yahoo talent. But this is business (as it should be). Microsoft needs to absorb Yahoo's customers - and only needs enough of Yahoo's culture to woo and retain said customers.

The real deal for IT executives with the Yahoo/Microsoft deal is how much of attention and resources are being poured into Internet advertising - and if that is occurring at the expense of enterprise product development. The other implication is if Microsoft is able to put itself in a position of dominance in the budding area of cloud software (i.e. Web 2.0). Would such dominance slow down (or even squash altogether?) innovation in the area?

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