Cultural differences loom large in Microsoft-Yahoo

When you look at the cultural differences between Microsoft and Yahoo, you don't need to look much further than a floor plan.

Microsoft has been a company of offices, where workers toil individually at their piece of a collective project. Yahoo, by contrast is a Silicon Valley archetype where workers sit in cubicles and tend to work collaboratively.

The folks in Redmond are known for being hard-charging and competitive, both internally and externally. Yahoo, meanwhile, tends to be more collaborative, sometimes to the point of inefficiency.

There are philosophical differences as well. Yahoo has been a huge proponent of open source, Microsoft a reluctant one.

Differences such as these are important to consider when one is planning to fork over $44 billion. Now obviously, Microsoft faces a number of hurdles (winning approval from Yahoo's board and shareholders, gaining the antitrust OK) before it even gets to this point. But these are the kinds of challenges that Microsoft should be, and probably is, trying to solve.

In an interview, Microsoft division president Kevin Johnson talked about the common "passion for innovation" at the two companies. That's probably true, but all companies, at least all good ones, can be defined by their passion. Both companies have also been accused of suffering from an identity crisis.

Johnson said that Microsoft has learned a great deal from its acquisitions of Tellme and Aquantive, though he acknowledged the significant size difference between swallowing Yahoo and buying those smaller companies.

"Certainly the process is the same," Johnson said, "This will be a more complex integration planning effort than Tellme and Aquantive."

One of the big differences is the amount of overlap between Yahoo and Microsoft on the product side. Both companies have their own advertising platforms as well as competing home pages, instant messaging programs, e-mail programs and content sites.

Now, overlap can be both a good thing and a bad thing. On the positive side, choosing one company's technology over another allows talent to be freed up to work on other projects.

And, clearly, many of Microsoft and Yahoo's businesses would benefit from greater scale a point Johnson brought up frequently in the interview and on a conference call with financial analysts. The companies already have instant messaging that is interoperable, but a single product would doubtlessly be more attractive. In search, in ad-serving and in content, a combined company would be a larger rival to Google.

Plus, the two companies tend to be strong in different regions. In Europe, for example, Yahoo tends to be weaker and Microsoft stronger. In the U.S., the two companies tend to attract different audiences with their mail products--Yahoo Mail appealing to younger and more savvy users, while Windows Live Hotmail has strong roots as an e-mail service for non-techies.

But each time the company picks a technology to go with, it creates winners and losers and the potential for animosity builds. Microsoft was quick to say that it would be a team of people from both companies that will need to make decisions, but it also gave the strong sense that it has done significant planning work already.

The company didn't tip its hand too much, but Microsoft executives said on the call that Windows Live was an important brand, as more of the operating system's duties move online. Office Live, for similar reasons, is also important. Microsoft also praised the Yahoo brand.

"I recognize the fact the Yahoo brand is a strong brand," Johnson said in an interview, echoing comments made on the call. MSN, notably, didn't get such an endorsement.