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Thursday, May 19, 2011

Projected Larry Ellison opinion on Microsoft+Skype

I've had a week or so to mull the Microsoft acquisition of Skype. Then out of the blue David Bryce, a BYU professor acquaintance of mine who'd just written an article for the Harvard Business Review, asked me my opinion on the acquisition. I figured he needed an unpolluted opinion, so I sent him the following before reading his HBR article:
Microsoft has entered the Novell-state-of-continuous-decline, and Skype is technologically bankrupt and only worth the acquisition for their customer base. Larry Ellison (Oracle) once said of CA's acquisition of Ingres and ASK, "Well, every ecosystem needs a bottom feeder." Alas, Microsoft has become a bottom feeder. Of course, with their existing base of zombies, they can do a perfect job of ratcheting down for another generation, just like Novell has done. I've been using Internet telephony for a decade, and the top of the technology heap is a company called 8-by-8 (formerly Packet8). Given Skype's enormous security holes, they're a perfect partner for Microsoft (still the number-one target for cyber criminals). Microsoft's security problems are architectural, as are Skype's. Which may well demonstrate the adage, "The bigger they are, the harder they fall." That said, as a stockholder, I'd applaud the acquisition (just as Bill Gates has done), because it will buy the poor devils some time.
Even in yesterday's news story (1 in 14 downloads have Microsoft-targeted malware attached), Microsoft is the number one target for cyber criminals and rogue governments.  Add to that Skype's stellar security record, and you have that metaphorical bull's eye just waiting for mischief. Hop into your time machine and visit Novell two decades ago. Visit Microsoft in two generations and you'll have today's Novell. After reading the HBR article, I added this note to my professor friend:
The "kicker" is that what Microsoft SHOULD do with the added time this acquisition gives them is to totally rewrite a new operating system (built for security), fork it to a compatible cloud architecture, and slowly jettison their old OS (like Apple did with MAC OS vs OS X). There is a precedent: This is probably before your time, but Microsoft's Excel blew Lotus 1-2-3 out of the water by cleverly seeing where the price/performance curve on processors and operating systems was going. Lotus kept doing business as usual and look what happened. Microsoft is making the same mistake. Larry Ellison and I have had a number of conversations on this over the years, so I can't claim full credit for the insight.
When I had the above-referenced conversation with Ellison, I think I commented to him that he sounded like Mao Tse Tung in his burn-it-to-the-ground-every-year mentality. He agreed, saying that he was never EVER satisfied with the status quo. He then laughed and shared with me that Bill Gates had called him and invited him to join a Redmond brain-storming session about the future. He said, "Do you think I'm going to let Bill Gates and his team pick MY brain? Get serious!" 

So if my "Vulcan mind meld" with Larry Ellison is still functional after lo these many years, I believe his advice to Microsoft would be as follows:
Give a billion dollars to a wholly owned subsidiary with the charter to "destroy Microsoft, Oracle, Google, Apple, and Facebook. Give them cross-licenses to ALL patents under your control, indemnify them against future lawsuits Microsoft may lodge against them, and then get the hell out of their way. If they win, you and your stockholders win. And if they burn all the money, you've only squandered a billion. Chump change considered the 8-plus billion you're blowing at the 30-times multiple for Skype. Oh yes, and another billion should go to 1000 CYBER PRIVATEERS who can rat out cyber criminals to you and to the FBI. Or you can do business as usual and become another Novell.
And for the record, Larry has followed the above advice, investing in companies that could put Oracle out of business. He's made a lot of money for his stockholders on those investments as well as keeping Oracle on its toes. 

 Taman Shud.

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Implementation suggestions for THE MORGAN DOCTRINE are most welcome. What are the "Got'chas!"? What questions would some future Cyber Privateering Czar have to answer about this in a Senate confirmation hearing?