I am Hollywood

[Chapter 1156: Bill Gates' Conditions]

Five years ago, Microsoft was eager to partner with Yahoo primarily because it recognized the potential impact of Yahoo's groundbreaking browser software on promoting its new generation of desktop operating systems.

However, after the tremendous success of Windows 95 and Microsoft's dominance in the operating system market, Bill Gates gradually felt that Microsoft had made a significant mistake in its collaboration with Yahoo. The Yahoo browser capitalized on the momentum from Windows 95 to quickly monopolize the graphical interface browser market, while Microsoft only received a promise that could not be fulfilled in the short term.

As a result, Microsoft harbored thoughts of tearing up the contract on more than one occasion. Initially, influenced by the 30% deferred stock purchase rights proposed by Eric, Bill Gates held on to the idea of acquiring Yahoo, hesitating to sever ties with them.

In the ensuing years, with the explosion of the internet wave, Microsoft increasingly realized that the original contract had become a hindrance to its efforts to expand its business on the internet. Although the Yahoo browser was the default browser for Windows, control over the software remained in Yahoo's hands.

Thanks to the traffic directed through the Yahoo browser as a network portal, Yahoo dominated more than 70% of the internet portal market, resulting in a staggering market value exceeding $170 billion. In contrast, Microsoft's MSN portal garnered almost no benefits from the Yahoo browser.

However, by the time Microsoft fully understood this, it was already too late to sever ties with Yahoo. Through a technological alliance and thousands of patent barriers, Yahoo's advantages in the internet business had become deeply entrenched.

Five years prior, had Microsoft refused to partner with Yahoo and developed its own graphical interface browser independently, even if it fell behind Yahoo by a year or so, it could still have leveraged its widely established operating system platform to create a new standard to rival Yahoo.

But now, Yahoo's series of technological standards had been implemented on millions of websites, and Microsoft, no matter how powerful, could not regain the initiative in the internet space where it lagged five years behind.

One could say that the partnership with Yahoo, agreed upon five years ago, constituted the most significant decision-making blunder for Microsoft, which had otherwise been riding high and unchallenged in those years. Even within Microsoft, there were many who criticized Bill Gates for having personally championed that partnership.

Many felt that if Microsoft had developed its graphical interface browser independently, leaning on its monopolistic advantages on the operating system platform, much of what Yahoo enjoyed should have belonged to Microsoft.

...

As they engaged in mutual probing, when Amy Adams brought in their lunch, Bill Gates picked up his utensils, cutting a piece of steak in front of him, gradually revealing his intentions.

Although the 30% deferred stock purchase agreement had become a non-issue, Microsoft was unwilling to give it up without ensuring it could gain sufficient advantages from Yahoo and the Firefly organization.

"Eric, you really don't want to sell Yahoo shares to Microsoft, do you?" Bill Gates inquired.

"Of course not," Eric replied, nodding with a smile. "However, after the deal, whether I receive $50 billion in cash or 10% of Microsoft's shares, it still favors me."

Seeing Eric's smile, Bill Gates suddenly thought back to years ago when he took advantage of a loophole in a contract with Apple and was sharply criticized by Steve Jobs. Though their attitudes were vastly different, the uncomfortable feeling in Gates was remarkably similar. He looked away from the food momentarily but still couldn't find the right words to accurately describe Eric at that moment.

As Bill Gates cut another piece of steak, he raised his head and said, "Eric, Microsoft has a three-month hesitation period. However, given the current situation, the Nasdaq index is unlikely to hold for another three months. Once the Nasdaq crashes, Yahoo's stock price will certainly plummet. By then, Microsoft won't need $50 billion to acquire 30% of Yahoo shares. For Microsoft now, raising $10 to $20 billion in cash is quite easy."

"Even if there is $10 to $20 billion, that's still pretty good," Eric shrugged, momentarily losing his smile, and stated seriously. "Bill, in my view, collaboration between Yahoo and Microsoft is the best win-win model. So, just tell me what you want?"

Bill Gates hesitated but quickly replied, "Eric, Microsoft can give up the stock purchase agreement, but on the condition that Firefly Electronics must cease the development of the YOS system. In compensation, Microsoft can customize an operating system platform specifically for Yahoo's mini music store."

Since 1996, Yahoo had begun developing the YOS system based on initial operating system ideas from Steve Mitnick and the mobile operating system concept proposed by Eric, with Y being the first letter of Yahoo.

Although this project was transferred to Firefly Electronics before Yahoo went public, the system name remained unchanged. After three years of quiet development, combined with concurrent projects like ARM chips and capacitive touchscreens, Firefly Electronics now possessed a very mature set of tablet computer technology.

Due to many details not meeting Eric's satisfaction, Firefly Electronics was in no hurry to release the tablet product, striving for perfection. However, the mini music store based on their series of technology achievements was already being promoted.

In fact, when discussing the mini music store plan, Firefly executives had considered how Microsoft might react to this new operating system. As expected, Microsoft had indeed grown vigilant about YOS, and not just casually.

Moreover, their vigilance was precisely accurate. The YOS system was central to Eric's strategic positioning in the future mobile internet industry. Even if he were to lose 30% of Yahoo's shares and instantly turn against Microsoft, Eric would never halt the development of the YOS system.

At that moment, in the restaurant, Eric only smiled noncommittally and said, "It seems you truly have done your homework in advance."

"Of course," Bill Gates nodded. "Microsoft never underestimates any competitor."

"Given that, Bill, you should know that this is an integrated hardware and software electronic device, and Microsoft can't possibly provide a customized system for Firefly Electronics' mini music store in the short term. We can't afford to wait for Microsoft," Eric continued.

Microsoft had clearly considered this situation. Bill Gates said directly, "Eric, Microsoft can acquire Firefly Electronics' YOS development department, so your mentioned problem wouldn't arise. I suspect Firefly Electronics intended to adopt the integrated hardware and software development model like Apple did, but history proves that such a closed model is fundamentally unworkable."

"I don't agree with Steve's closed model of integrated hardware and software either. However, I also believe that paths are created by people, and your disagreement doesn't mean this business model cannot succeed," Eric replied, steadfastly shaking his head. "So, Bill, Firefly Electronics won't stop work on YOS, nor will we sell the YOS system to Microsoft. I genuinely hope to continue collaborating with Microsoft, but that condition is unacceptable. Perhaps you could consider some other requests."

"What about the Yahoo browser?" Bill Gates focused intently on Eric. "Eric, the restrictive terms in that contract expire next month. Microsoft can launch its own browser at any time, excluding Yahoo's browser from the Windows system."

Eric smiled and said, "Bill, what you mean is that if I agree to transfer YOS, Microsoft will continue to keep Yahoo as the default browser?"

"Absolutely," Bill replied.

Eric raised another question, "You intend to completely abandon MSN then?"

Bill Gates hesitated before answering, "If a new contract is signed, Yahoo's browser will definitely shift traffic toward MSN."

Eric shrugged, "So, that's another matter. Bill, I know Microsoft can launch its own graphical interface browser without hurdles after five years of technical digestion, but it technically cannot compare to Yahoo's browser. Also, Microsoft is already facing enough antitrust lawsuits; I'm sure you wouldn't want to add another lawsuit for browser monopolization. Hence, continuing to collaborate with Yahoo remains the best choice."

Gates finally showed signs of impatience, saying, "Eric, you keep talking about cooperation, but I only see Yahoo's unilateral demands, and your words lack any genuine intent to collaborate."

"That's because you've presented conditions I simply cannot accept. So let's discuss alternatives, such as Yahoo browser. As long as it remains the default browser for Windows, I could agree to Yahoo browser directing traffic to MSN. Moreover, Yahoo can pay Microsoft an annual software pre-installation fee. What do you think?"

Continuing their browser collaboration and charging Yahoo a software pre-installation fee was, after all, within Microsoft's consideration range. But now that Eric proposed it first, it became a cooperation condition proactively offered by Yahoo.

Bill Gates felt increasingly vexed, knowing in his heart that due to past mistakes, Microsoft was now in a passive position. Eric was entirely disregarding the stock purchase agreement in Microsoft's hands; regardless of whether it was executed, Yahoo wouldn't suffer losses.

In his view, the only true bargaining chip Microsoft had was the Windows platform pre-installation rights for the Yahoo browser.

However, internally, Microsoft also had significant divisions about continuing the partnership with Yahoo. Many executives advocated cutting all ties with Yahoo immediately in favor of launching their own browser to fully support their MSN portal business.

Though having maintained control of Microsoft, Bill Gates' control over the software company wasn't as strong as the outside world perceived. The most obvious sign of this was that Microsoft was showing clear signs of "big company syndrome," characterized by bureaucratic slowdowns, sluggish responses, and internal power struggles.

If Bill Gates had maintained absolute control over Microsoft, many of these issues could have been avoided.

"Eric, you need to understand," after a moment of thought, Bill Gates continued, "Windows is Microsoft's platform, and on this platform, how the rules are set is always up to Microsoft to decide."

This was a clear threat. Eric remained poised, nodding softly, "Of course, Bill, I understand, which is why I want to continue our collaborative relationship."

Bill Gates could no longer contain his raised voice, "But you show no genuine readiness to cooperate!"

Hearing Bill Gates' sudden outburst, Eric frowned slightly while glancing at his food. Although he didn't see spit flying, he found his appetite entirely gone, dropping his utensils, "Bill, we're adults, can we not act like children throwing tantrums when they don't get their toys?"

Other executives from Firefly's systems, who were also dining nearby, heard Bill Gates' sudden outburst alongside Eric's instructive tone. Despite their attempts to restrain themselves, some couldn't help but laugh.

Bill Gates instantly felt embarrassed, also setting down his utensils, looking displeased. "Eric, it seems we need not continue this discussion further."

Eric nodded, "Why don't you take a moment to calm down? Perhaps we could reconvene tomorrow?"

Bill Gates grimaced, coldly responding, "I'll be returning to Seattle this afternoon. The remaining matters will be handled by Microsoft's personnel in communication with Yahoo."

Eric was agreeable. "That works too. Feel free to call me anytime; you know my number."

...

Watching Bill Gates storm out, Frank Wells, who had been seated nearby, approached with a cup of coffee and smiled. "That didn't go well?"

Eric contemplated the rectangular dining table for a moment, called Amy over to request a new lunch, then replied to Frank Wells, "Gates has been dominant for so long, trying to leverage insufficient bargaining chips to obtain what Microsoft desires. Do you think I could agree to his terms?"

As a contract that was essentially useless, even should Yahoo decline every condition posed by Microsoft, the odds were still over 90% that Microsoft would proactively abandon it.

Regarding the Yahoo browser, as user habits formed and its inherent advantages persisted, unless Microsoft completely banned it from the Windows platform, even without its default browser status, the Yahoo browser could maintain a market edge for a long time.

In a few years, as Yahoo continued to expand its presence in the internet space, the Yahoo browser's role as a portal would become less critical. Even now, the browser dependency of the Yahoo portal and Google search engine had already significantly diminished.

Though he was the president of Firefly Group, Frank Wells was also aware of the collaboration nuances between Yahoo and Microsoft. "If that's the case, is there a possibility of complications ahead?"

*****

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