Microsoft Vs. Google: A Battle Of Epic Proportions - Part II

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Office vs. Google Apps

Microsoft Office is the leader when it comes to word processing, data spreadsheet functions and capabilities, and computer presentations. Office is Microsoft’s (MSFT) “bread and butter” and has been so for a very long time. No other “office” like software has ever really gotten off the ground and come close to Microsoft Office until the release of Google Apps. Google Apps are a free online version of Office that allow for easy sharing and usage from anywhere. Google Apps are a “fresh breathe” in the market place and open up the door for the cloud. Rumors of Google’s (GOOG) “G” Drive have been circulating and would ultimately give users storage space that could be easily and securely accessed from anywhere, forever negating the need for an external hard drive, at least for personal use. Businesses are also tapping into Google Apps which package and license a special version for businesses.

Google has an amazing think-tank and is coming up with new applications and programs all the time. If you take a look at Google’s list of products its huge, extremely innovative, and free! Google will even package these applications for you to allow for easy downloading. Google also has a chat service, G-chat, that doesn’t require downloading a program and is very innovative compared to Microsoft’s MSN messenger.

Microsoft is not going down without a fight however. In mid 2008 Microsoft sought out the company that helped Google create Google Earth as Microsoft was looking to offer a “similar” mapping service. This is not surprising though as we have seem Microsoft on the tail end of many innovations but most of the time due to its sheer size it ultimately stands alone as the victor. However, in this case, Google is no weak opponent and has the size and human capital to go head-to-head with Microsoft for control of the Internet, and win.

Overall, Google reigns supreme in this category as Google continues to create new products ranging from online books to health search engines to G-chat. Google Apps may not be as advanced as Microsoft Office, or as well known, but they do allow for easy file sharing and access from anywhere, capturing the essence of the technological world and its push for “easy-anywhere-now” usage.

Google 3 Microsoft 0

Fight for YAHOO

Although speculated since May of 2007 when Microsoft approached Yahoo (YHOO) about a friendly takeover, the big news came on February 1, 2008, as we all sat back and watched Microsoft make an unsolicited $44.6 billion bid for Yahoo. The deal valued shares of Yahoo at $31 a share, a 62% premium at the time. Microsoft wished to acquire Yahoo in order to grow its online advertising business and position itself to take on Google head-to-head in the online advertising market. Historically Microsoft has not been able to generate money in the online search/advertising business at least not at Google like margins. Microsoft seems desperate to make its dream of knocking out Google and becoming the ruler of all technology (as Microsoft would essentially then control the personal computer and the Internet) a reality. The struggle went on for a while and ultimately led to Yahoo staying independent and Jerry Yang, ex-Yahoo CEO finding a new hobby.

Google also made a play at Yahoo, attempting to form a partnership, essentially paying Yahoo to place Google ads on its Internet search engine. The partnership never got off the ground however due to Google wanting to stay clear of the US government regulators who were probing into the potential agreement which was borderline monopolistic. Google gave up the partnership, which would have really benefited both parties and ultimately kept Yahoo out of Microsoft’s hands.

Yahoo is currently trading very cheaply, well below Microsoft’s last offer and with Jerry Yang out of the picture, it seems evident Microsoft will make another attempt at purchasing the #2 Internet search engine. New Yahoo CEO Carol Bartz is not opposed to a partnership or selling certain parts of the business, but did note that she did not come to Yahoo to break up the company and hand it over to the hands of Steve Ballmer and Microsoft.

Microsoft gets the point as it seems clear that Microsoft will make another attempt at purchasing at least some of Yahoo and this time should be very successful as Microsoft has the support of Yahoo shareholders including Carl Icahn. Microsoft is going to get Yahoo at a very attractive price this time around but needs to be very careful as integrating Yahoo, a lackluster company, into its “ho-hum” search business, will be very tricky and could be met with some opposition by Yahoo employees. There could be many potential clashes and a lot of turnover and restructuring, so we may find out it would have ultimately been better to leave Yahoo alone. I think Google in the end will reign supreme in the Internet search market and benefit greatly from a lackluster combining and potential integration failure  by its two biggest competitors.

Google 3 Microsoft 1

Disclosure: The mutual fund the author manages is long GOOG , T and MSFT.

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