Oracle to Maintain Brisk Takeover Pace, with Focus on Security, BI

Oracle Corp. intends to maintain a brisk pace of acquisition activity, citing security and business intelligence (BI) as areas where it will look to acquire smaller companies whose technologies can be easily integrated into Oracle’s product portfolio and sales programs.

According to a Reuters article that appeared online this evening, the database giant, now also a leader in enterprise-software applications, says major deals also are possible. After a lengthy effort a few years back involving organic software development, Oracle chose to buy its way into the ERP and CRM markets with blockbuster software acquisitions of PeopleSoft and Siebel Systems, respectively.

Vishal Bhagwati, an Oracle vice president whose responsibilities include global mergers and acquisitions, says the company expects to maintain a pace of closing three or four deals per quarter, with most takeovers ranging from $5 million to $100 million per transaction.

Speculation now can begin regarding which security and BI companies Oracle might pursue.

Microsoft Acquires Natural-Language Online Interaction Company

Financial terms have not been disclosed, but Microsoft announced this afternoon that it has acquired privately owned Colloquis Inc., a purveyor of online business software and services that feature natural language-processing technology.

You can get a feel for what the Colloquis technology does by visiting the company’s website and trying the online demonstration provided on the right side of the home page. The company’s software seems capable of providing text-based answers to a wide range of contextually relevant questions.

I asked the demo whether the company’s software could support voice, and I got the following answer:

Although Colloquis technology could in principle be employed within a voice application architecture, we have chosen to focus on text-based applications. If you are interested in using Colloquis technology in a voice-based solution, please contact Colloquis Sales Department.

Colloquis’ existing customers include Comcast, Panasonic, Cingular, MSN (that makes sense, given today’s developments), Encarta (another Microsoft connection), AOL, CareerBuilder, TimeWarner Cable, Cox Communications, Vonage, P&G, and Harrisdirect.

Microsoft will incorporate the Colloquis technology into its own products as well as offer services based on it to businesses with online operations. Initially, Microsoft will offer a managed service called Windows Live Service Agents based on Colloquis’ Automated Service Agent offering. Windows Live Service Agents will augment Microsoft’s existing contact center solution, Microsoft Customer Care Framework (CCF).

Xbox will be the first group within Microsoft to use Windows Live Service Agents. Microsoft says the Colloquis technology will enable Xbox customers to rapidly find helpful information related to their support needs.

Microsoft also plans to use Colloquis technology in an application called Windows Live Agents (why are so many of Microsoft’s products given such similar, ultimately confusing names?), a conversational application that users can interact with via Windows Live Messenger. According to Microsoft, its Microsoft Live Agents are used to entertain, encourage engagement with products or services, provide a new advertising opportunity for brand advertisers, and drive search and information retrieval.

This acquisition is intended to improve the efficiency of Microsoft’s customer service and to reduce operational costs. The Colloquis technology works and seems to have some further potential, so we’ll have to see how well Microsoft integrates it into its products, services, and support offerings.

Microsoft Makes Christmas Push for Vista-Compatible Wares

Microsoft’s Windows Vista won’t be ready to serve as a stocking stuffer for the holiday season, but Microsoft is launching two programs — "Certified for Windows Vista" and "Works with Windows Vista"– that will promote hardware and software that will work with Vista when it finally ships.

The products comprised by the "Certified for Windows Vista" designation will have gone through independent testing to meet specific performance standards, while the "Works with Windows Vista" products will simply be Vista-compatible.

In reference to the programs, Mike Sievert, corporate vice president of Windows client marketing, said the following:

This certification ensures our customers will have a great experience with these products now, and an even better one when they are using them with Windows Vista.

That doesn’t exactly sound like a pitch that will have retail cash registers ringing in the buildup to the holidays. With all the other competition for consumers’ wallets — what with gaming consoles, PC-based games, handheld gaming platforms, new mobile phones — it’s difficult to imagine that consumers will be breaking down the doors to buy hardware and software that will work with an operating system that will not be on the market when the holidays roll around.

These programs have more to do with allaying the disappointment of Microsoft’s Vista partners, who had expected Vista to ship for the holidays, than about generating meaningful revenue during the festive season.

Ballmer Interview Demonstrates Microsoft Adrift in Consumer Markets

If you’ve seen it already, I apologize for my tardiness in getting around to mentioning it, but yesterday BusinessWeek’s website featured an edited transcript of an interview with Microsoft CEO Steve Ballmer.

The interview is fascinating because of how clearly and confidently Ballmer speaks about enterprise markets and competitors and how ambiguous and uncertain he seems when discussing Web 2.0 developments, consumer-oriented markets, and advertising-driven business models.

On the subject of Google’s acquisition of YouTube, Ballmer doesn’t seem to know what to think. On one hand, he argues that no business model supports Google exchanging $1.6 billion in stock to acquire YouTube. Then, when challenged by a BusinessWeek interview on whether he is clear in his assessment of YouTube’s valuation, he wavers.

What follows is the relevant excerpt of the interview:

Is YouTube really some permanent, long-term thing, or is it a fashion? I’m not saying it is a fashion. But every time we do valuations, I wonder if we can afford to keep this hot for 10 years. I’m sure somebody at Google has got to do the same analysis, because even $1.6 billion is more than 1% of their market cap.

Is there a business model? Right now, there’s no business model for YouTube that would justify $1.6 billion. And what about the rights holders? At the end of the day, a lot of the content that’s up there is owned by somebody else.

The truth is what Google is doing now is transferring the wealth out of the hands of rights holders into Google. So media companies around the world are all threatened by Google. Why? Because basically Google is telling you how much of your ad revenue you get to keep.They better get some competition. Us. Yahoo! (YHOO). Somebody better break through or you can short all media stocks right now. As long as there are two, you can hold onto media stocks. Google understands that. And that’s one reason why they’re willing to lose money up front. Just look at some of these deals. That MySpace deal (where Google provides the ad engine for MySpace). We bid a lot of money on that MySpace deal. And we got outbid. We wanted to win that MySpace (NWS) deal. At some point, we said we can’t do this. Now Google can afford to spend more than us and Yahoo because they have more people in their ad system, so they’re getting better yield, effectively.

Getting back to the core question, it all depends on how that plays out. I am surprised that Google would pay $1.6 billion for it.

Then, when challenged by an interviewer, he says the following:

I’m not saying it is overvalued. I’m not trying to say that. It depends on a set of factors. I’m not saying I wouldn’t write a check for that amount of money. I might. . . . .

It is one of those things where you have to think. You can’t punt either way. If you’re asking me if I would offer $1.7 billion if no one else was offering $1.6 billion, no I wouldn’t do that. On the other hand, if somebody is really going to offer that amount of money, you cannot reject these things. And I’m not saying that we are.

He’s hardly confident in his assessment. In fact, it seems he’s fundamentally unsure of his opinion or about how Microsoft should approach such matters. It’s a safe bet that he’s not the only one at Microsoft struggling to comprehend these issues.

He seems on firmer ground when discussing the Xbox business, but he really finds his feet when talking about competitors and business dynamics in enterprise markets. Here’s a relevant excerpt:

Any one company, we know how to compete with. It’s alternate business models that we will have to embrace or compete well with. You give me any enterprise software company, O.K., and I’ll say c’mon. We know how to go do that. We do do that. And we’re really pretty good at it. We haven’t gotten any worse at it. Boom. Boom. Boom. We know how to keep coming.

[Take open source.] Open source is not a new technology area. It was a new business model. In the last three or four years, we have competed very well by extending our value. Open source never goes away as a business model or competitor. We have learned how to compete with open source, and we will compete with it for the rest of time. But competing with open source will have to be something that’s burned bright on the foreheads of our senior people.

Notice the change in tone, if not in substance. Microsoft is downright cocky when it comes to understanding how it can leverage its Windows and Office installed bases in the enterprise to open up new revenue streams in areas such as unified communications, CRM, business intelligence, security, and asset management, among other areas.

When it comes to consumer markets, Ballmer, and the vast majority of the executives below him, are in a fog.

Google’s YouTube Buy Shifts Focus to Yahoo

Today’s edition of the Wall Street Journal reports that Yahoo’s acquisition discussions with social-networking site Facebook have bogged down.

The context of the report is the implied contrast between Google’s alleged decisiveness in pursuing and closing acquisitions and Yahoo’s comparative slowness and tentativeness. The following paragraph, excerpted from the WSJ article, is illustrative of the theme:

Yahoo’s failure to date to secure a deal for Facebook highlights the slower pace of its efforts to expand, following Mountain View, Calif.-based Google’s swift agreement to purchase online video site YouTube, of San Bruno, Calif. Yahoo had recently held discussions with YouTube concerning an acquisition, according to people familiar with the matter.

Yahoo is under pressure from the business media, and perhaps from many of its investors, to make a move that will counter Google’s big-money acquisition of YouTube. Yahoo is being compared unfavorably with Google, since — at least in some respects — they compete directly for web-based advertising revenue, with Google widening its market advantage in that area. 

Not only has Yahoo stumbled recently in upgrading its advertising system, it also has announced that slowing sales of Internet advertising would impair its ability to meet third-quarter revenue targets, and it was involved in unsuccessful acquisition talks with YouTube before Google swept in to take that prize. As a result of all these factors, Yahoo’s stock price has stalled.

One could make a plausible argument that Yahoo is right to exercise sober, measured due diligence in its acquisition-related business processes and negotiations. It is better, after all, to make the right move slowly than to make a disastrous move impulsively. Then again, the other problems, with the upgrade to its advertising systems and the advertising-related revenue hiccup, argue that perhaps Yahoo is suffering from a broader malaise.

In that context, perhaps the inability to move more decisively, in its own tactical execution as well as in strategic matters, is an institutional problem that Yahoo will need to correct if it hopes to keep pace with Google on the balance sheet as well as on the M&A front.