Yahoo Will Turn USS Microsoft Battleship

The six-week stalemate between Microsoft and Yahoo! is starting to see a little bit of movement, thanks to Microsoft meeting with Yahoo execs to share their views on how the combined companies would look.

Meanwhile, the financial analyst community is debating everything from whether Microsoft will raise its bid (many say no) to whether Yahoo is a good use of Microsoft's cash. Many speculate an all cash offer is Microsoft's next move. With News Corp and AOL out of the picture, it looks more likely that some kind of deal will be struck with Yahoo shareholders and board members.

Part of the "good use of Microsoft cash" debate is whether Microsoft would be better to use that money to buy smaller technology companies. This is something I believe Microsoft should and will continue to do but it's no substitute for buying Yahoo. Here's why.

Microsoft has the beginnings of remaking itself into the next generation software company through Ray Ozzie's mesh software and device vision that's gradually unfolding. But technology is only one part, maybe even the smaller part, to make this transformation successful.

Microsoft still thinks and operates like an embedded software company, not an Internet company. Microsoft's never really gotten it about the Internet, not at least in the same way as Google and Yahoo. To take on Google, Microsoft not only needs the valuable online software, search engine and advertising assets, Microsoft needs Yahoo's Internet mindset.

Yahoo brings the mentality, thinking and beliefs about being an Internet company. Microsoft doesn't need any more people that already think like Microsoft. They need the Internet mindset Yahoo leaders and employees can bring.

Microsoft is a huge and difficult battleship to turn for the course change Microsoft Mesh will require. Yahoo could make that transition easier, giving Microsoft additional talent and a fresh perspective on living and competing as an Internet company. From my perspective, this is the biggest asset Yahoo brings to Microsoft table in Redmond.

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