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Minyan Mailbag: Should Microsoft Buy Time Warner?

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I think it would be in MSFTs best interest to buy other distribution outlets rather than content developers.

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Kevin,

Any thoughts on
this article suggesting Microsoft (MSFT) should buy Time Warner (TWX)?

Minyan Neal


Minyan Neal,

Here are my thoughts:

MSFT would make a huge mistake by trying to acquire TWX and here's why: Google (GOOG) is a fantastic business. Yahoo! (YHOO) is a fantastic business. MSFT was a fantastic business but they lost their focus. They're getting it back.

Yahoo! and Google have something in common - they produce almost none of the content that appears on their sites. In essence they aggregate the best of the best - or the most popular. They do this with proficiency based on technology, not an individual's opinion. Google more so than Yahoo! and both much more than MSFT.

Google's mission is to organize the world of information. Information is very broadly defined - it's entertainment, finance, news, anything written, audio or visual. Yahoo! used to do this until the current management decided to create original content. It's a very tough proposition. Very labor intensive with a very high failure rate. Yahoo! recently backed off looking for that "I Love Lucy" moment in favor of improving what it did best…organize the world information!

These are distribution channels not radically different than say NBC, CBS, ABC, etc. But in my opinion are much more dynamic. Where these companies win is in providing the tools and the technology to organize and manage content better than anyone else. Google's strategy is what it calls "the one box." They want any user to be able to access what they want from that one search box.

Here's where I believe MSFT would have an advantage, and I can say with a very high level of confidence is where Google is focusing. Schmidt has said it numerous times – fiber optic networks or cable. I think Google is brilliant in that it is rumored to be building its own worldwide fiber optic network. This means that it is not only the organizer, but the true distributor. Better than TWX is Comcast (CMCSA) and other cable providers, but this only covers the US. I think it would be in MSFTs best interest to buy other distribution outlets rather than content developers. MSN has done OK, but has never materialized as THE player because it is such a hit or miss game.

Spend a little time and look at Internet Explorer 7. It's an innovative product. There's a trust factor that many will have to get over because the MSFT monopoly hurt its brand and simply put, it's a little "Big Brotherish." However, if it can re-instill the notion that it is the best technology out there, then we may see the resurgence of the sleeping giant.

-Kevin
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Position in MSFT, TWX
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