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Microsoft runs its datacenters on ‘Autopilot’

With all eyes on what Microsoft is doing in the online-advertising space, it’s easy to give short shrift to the datacenter and back-end infrastructure that is powering not just adCenter, but all of Microsoft’s various Live services.

Microsoft CEO Steve Ballmer reminded Wall Street analysts earlier this week that the cloud infrastructure is key to how Microsoft goes forward with Software+Services (S+S). During his February 4 Strategic Update in New York, Ballmer told analysts:

“And a lot of the things that we have been investing in, in terms of cloud platform, which themselves have no direct business model but come to market as servers, as desktops, et cetera, it will require reasonably significant investments to start commercializing that cloud platform….
“What’s the future of Windows, what’s the future of corporate desktop value? Each and every one of these businesses, on top of a consistent cloud platform, transitions to have additional revenue and profit opportunities, based upon this transformation to the cloud.”

There are lots of components beyond just the racks of Windows Server boxes that are keeping Microsoft’s online properties up and running. Some of the other pieces that have come across my radar screen (thanks to tips from various sources who requested anonymity):

* AutoPilot: The management system for Microsoft’s Windows Live Messenger and Live Search services. Word is Microsoft is extending AutoPilot to handle every Windows Live service, as well as some other members of its Live and Online families. AutoPilot performs tasks like network monitoring, power monitoring, performance monitoring, analysis, etc. It also will enable Microsoft to use commodity hardware in deploying its datacenter infrastructure.

* Bedrock: The core shared publishing platform for Live

* Shuttle: The feed-management system for Live. I’m not sure how this fits (or doesn’t) with Microsoft’s FeedSync, which is one of Chief Software Architect Ray Ozzie’s pet projects.

* Fuse: A SQL Server diagnostics/monitoring system

* Cloud DB: The project via which Microsoft is scaling out its back-end structured data store. Cloud DB will be the storage platform for many of the Windows Live services and applications. The team is working to make SQL Server more fault tolerant, scalable and highly available.

Microsoft officials have been playing up their desire to combine their datacenter assets with those from Yahoo in order to maximize network effects as one of the primary rationales for Microsoft’s proposed Yahoo takeover. As others have pointed out, Yahoo’s back-end infrastructure — which is as involved and complex as Microsoft’s, no doubt — is powered heavily by Linux and other open-source software.

Sounds like a daunting task to combine the two. Maybe Microsoft should just let Yahoo’s datacenters run Linux and use that as another way to study its competition…

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Microsoft makes $44.6bn offer to buy Yahoo

Microsoft has offered to buy the search engine company Yahoo for $44.6bn (£22.4bn) in cash and shares.

The offer, contained in a letter to Yahoo’s board, is 62% above Yahoo’s closing share price on Thursday.

Yahoo cut its revenue forecasts earlier this week and said it would have to spend an additional $300m this year trying to revive the company.

It has been struggling in recent years to compete with Google, which has also been a competitor to Microsoft.

“We have great respect for Yahoo, and together we can offer an increasingly exciting set of solutions for consumers, publishers and advertisers while becoming better positioned to compete in the online services market,” Microsoft chief executive Steve Ballmer said.

Chairman quit
There has not yet been any comment from Yahoo.

Its chief executive, Jerry Yang, announced on Tuesday that he intended to lay off 1,000 staff as part of a restructuring plan.

Terry Semel, who stepped down as chief executive last June, also quit as non-executive chairman on Thursday.

Microsoft said that Yahoo shareholders could choose to receive either cash or shares.

Yahoo shares have fallen 46% since reaching a year-high of $34.08 in October. They rose 54% in pre-market trading.

“Ultimately this corporate marriage was forced by the rise of Google, which has grown into a serious competitor for both Microsoft as a software company and Yahoo as an internet portal,” said Tim Weber, business editor of the BBC News website.

“It is a shotgun marriage, but the person holding the shotgun is Google.”

‘Exorbitant premium’
According to its letter to Yahoo, Microsoft attempted to enter talks about a deal a year ago, but was rebuffed because Yahoo was confident about the “potential upside” presented by the reorganisation and operational activities that were being put in place at the time.

“A year has gone by, and the competitive situation has not improved,” Microsoft’s letter said.

But there has been some concern about the price that Microsoft is offering.

“To me, the premium seems exorbitant, for what is a dwindling business,” said Tim Smalls from the brokerage firm Execution LLC.

“I personally don’t see how the synergies of Microsoft-Yahoo is going to take on Google.”

Other analysts were more enthusiastic about the offer.

“It is a fantastic offer. It is game on,” said Colin Gillis from Canaccord Adams.

“This consolidates the marketplace down to Google versus Microsoft. These two companies will be going head to head.”

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