Can a tiger change its stripes? Can you turn water into wine? Can Ray Ozzie and Steve Berkowitz transform Microsoft into an Internet company from its Windows/Office roots? This is a question highlighted by the New York Times, which looks at Microsoft efforts to beef up is online operations through initiatives such as Live. At the risk of under-playing the dominance of Internet Explorer and the popularity of MSN.com, Microsoft isn't an Internet company and, frankly, it will never be seen as anything else other than a giant software company with some interesting side projects (e.g. Xbox).

This isn't necessarily a bad thing but it is what it is even though Microsoft has been struggling to convince people otherwise for the past decade. If you take a step back, Microsoft's track record beyond Windows and Office has been, at best, mediocre. A good example is television where it has toiled for years and spent billions of dollars to establish a foothold in the living room. Microsoft has acquired stakes in cable companies, purchased start-ups (anyone remember WebTV?) and, most recently, tried to developed an IP-TV platform for carriers. But after all this time, money and effort, Microsoft only has a modest presence in the TV or video markets.

Microsoft's problem - and challenge - is the Internet isn't part of the corporate DNA so it's hard to really be a vibrant and innovative Internet player when it's not really who you are. A part of this reality is Microsoft continues to make billions of dollars from selling Windows and Office. It's the business so Microsoft's lack of success in diversifying into other businesses is no different than what many other companies have faced over the years. Microsoft, however, is fortunate its core business continues to rumble along as opposed to being forced to diversify because the core business is eroding.

What Microsoft and investors need to accept is Microsoft will continue to be a software company with a Web presence as long as its continue to operate in its present form. If, however, the company decided to break itself into independent operations (Windows/Office, Xbox, MSN/Internet) then it might be a different story because each entity would have its own core mission and raison d'etre. In the meantime, Microsoft will attempt to fight the good Internet fight while chasing after dyed-in-the-wool Internet rivals such as Google and Yahoo.

For more on Berkowitz, News.com recently did a Q&A with him. By the way, read what you will into this quote Berkowitz gave the NYT about life at Microsoft compared with his previous employer, Ask.com: "I’m used to being in companies where I am in a rowboat and I stick an oar in the water to change direction. Now I’m in a cruise ship and I have to call down, Hello, engine room!. Sometimes the connections to the engine room aren’t there."

Technorati Tags: Google, Microsoft

In a press release ("Yahoo! Re-Aligns Organization to More Effectively Focus on Key Customer Segments and Capture Future Growth Opportunities") that could become a classic case study for public relations students, Yahoo has cleared the decks for Susan Decker to become its new COO by firing Dan Rosensweig. You figure a media company such as Yahoo would figure out a more elegant way than issuing a 1,500+ word press release. Of course, Decker's ascension to COO has been the word's worst kept secret so you figure Rosenweig isn't too broken up about getting canned less than three weeks before Christmas. Tom Foremski raises a good point the speculation Rosenveig was the one who leaked the "Peanut Butter Manifesto" a couple weeks ago, while Paul Kedrosky wonders why co-founder David Filo's name is missing from the press release. Yahoo's biggest challenge right now appears to be figuring out what it wants to be. Does it want to be an Internet services companies or a media company? And how long does CEO Terry Semel stick around?

Forget about the Peanut Butter Manifesto; Yahoo's latest strategic foray (aside from buying Web start-ups such as Bix..but not MyBlogLog) is a deal with seven newspaper chains (which collectively own 176 newspapers that collectively have 12 million subscribers and 58 million monthly Web site visitors) to share content, advertising and technology. This comes hot on the heels of a three-month test agreement that Google unveiled earlier this month with the New York Times Co., Tribune Co., Washington Post Co. and Hearst during a three-month test period.

   These deals are getting a lot of coverage given the high-profile players involved but they should be viewed with a high degree of skepticism. How come? Well, striking deals is easy; making them work is a completely different thing. The newspaper industry, however, should get some credit for trying something different at a time when their operating and advertising models are under siege from online competitors. The big question is why weren't newspapers being as creative and aggressive much earlier?
    As for Google and Yahoo, these strategic gambits are all about attacking other advertising markets. The newspaper ad market, for example, is worth $48-billion, which makes it a juicy target for new competitors. Obviously, both sides see these deals as win-win propositions, which is why everyone is so enthusiastic . But before everyone gets too excited, let's see whether the two sides can dance with each other. At first blush, you have to ask how both sides are going to play nice given the Web is attracting more advertising while newspapers are getting less. It would be easy to suggest the newspaper industry is getting desperate so doing a deal with the devil is better than doing nothing at all. In many ways, newspapers have only themselves to blame given it has taken them so long to determine an online strategy (e.g. free content vs. subscriptions) and embrace new tools such as blogs, podcasts and RSS.
Update: Eric Jackson has a terrific "open letter" to Jerry Yang and David Filo, which suggests CEO Terry Semel needs to go. Eric recommends Susan Decker as his replacement.
Tags: Yahoo, Google, newspapers, advertising

Rather than jump right into the Peanut Butter Manifesto comment-frenzy, I decided to let it simmer for a bit while doing some serious NFL channel-surfing. So what's the deal other than the shrouded motives of Yahoo senior V.P. Brad Garlinghouse, who thinks the company is spreading its resources too thin? If you go way up the strategic food chain, it may suggest the idea of trying to be all things to all people is fundamentally flawed. Yahoo, for example, has acquired everything from Flickr and del.ico.us to blo.gs and Musicmatch. The question is where there is a common theme behind Yahoo's M&A activity other than the need to buy cool technology/services and smart people? For that matter, does any of the major players' acquisition plan make complete sense? What many companies seem to be forgetting is their core purpose. In other words, what are they are offering and is that offering clear to potential and existing customers? What is Yahoo's meaning in life other than attracting as many people as possible and making money from them. If that's the strategic premise, the acquisition of Overture makes complete sense. As for anything else, that's open for debate. Perhaps the biggest concern from Garlinghouse's rant, P.R. exercise, power move, etc. is the M&A dreams may be coming to end an abrupt end for all those Internet start-ups who were banking on being acquired as a way to escape the reality a flawed or non-existent business plan, and/or a dwindling bank account. For an interesting look at acquisitions made by Yahoo, Google and Microsoft, check out this chart compiled by Shmula.com. Some other measured takes on the PBM come from Rob Hyndman, who believes it hints at senior management changes within Yahoo, and Mathew Ingram, who post titles - This peanut butter is del.ici.us - is among the most creative I've seen in a long time. Tags: Yahoo, Brad Garlinghouse, M&A, peanut butter

I've been a Yahoo Mail beta user for the past couple of months. Although I really like the Outlook-like look and feel, it's far from perfect. For one, it seems to be a system hog. I can't you tell many times, I've had to wait for the inbox to load - during which it is difficult, if not impossible, to switch to another browser tab within Firefox. As well, the newest iteration somehow decided to no longer include my rogers.com e-mail address, even though it's the default account. It's a mystery because the rogers.com account was alive and well two weeks ago. As a result, I have to go back to the original Yahoo Mail service to use my rogers.com account. Looks like there is a bug in the beta.