San Antonio Express-News David Hendricks Column
By David Hendricks, San Antonio Express-News
Feb. 2–SAN ANTONIO STANDS TO WIN UNDER MICROSOFT DEAL: A Microsoft-Yahoo combination could be felt in San Antonio — all the way from Westover Hills to downtown.
Being a Microsoft Corp. city, San Antonio ought to cheer the aggressive move the software giant made Friday toward grabbing a bigger piece of the Internet pie.
Microsoft is building a $550 million data center — one of its digital brains — in San Antonio. The investment could almost double to $1 billion with a possible addition of an identical 470,000-square-foot building on the 44-acre tract in Westover Hills.
If Redmond, Wash.-based Microsoft is able to acquire Yahoo Inc., the software company’s Internet activity would zoom, requiring even more data center capacity than was envisioned last year.
Combining Yahoo’s Internet content, e-mail and search services with Microsoft’s would make the combined companies’ traffic approach that of Google Inc. Neither Microsoft nor Yahoo likely could close their gaps against Google alone. Together, Microsoft’s engineering talent and Yahoo’s home-page popularity can make it a horse race.
The people who must be scratching their heads the most in San Antonio over the possible Microsoft-Yahoo deal work in the building at St. Mary’s and Houston streets — AT&T Inc.’s headquarters.
AT&T soon may become a key partner to Microsoft instead of Yahoo in this contest with Google.
Earlier this week, AT&T worked out a four-year extension of its Yahoo partnership where the two companies jointly market broadband services. Yahoo also can place more of its home-page content on AT&T cell phones, and AT&T can sell more DSL services under the arrangement.
Insert “Microsoft” instead of “Yahoo” in that equation with AT&T, and it is easy to see that Google will have a formidable rival. That’s the motivation behind Microsoft’s $44.6 billion offer for Yahoo.
AT&T, in negotiating the partnership extension, sliced a percentage of Yahoo’s advertising for itself in return for a $300 million to $400 million upfront payment. Giving up some of its ad revenues is an indication of how far Yahoo was sliding in the Internet field.
Looking further into the future, the telecommunications-Internet chessboard becomes even more complicated for AT&T, Microsoft and Google.
The Federal Communications Commission last week started an auction of prime cell phone spectrum, wavelengths being abandoned by TV stations.
Google entered the bidding with one goal of forcing the cell phone giants, including AT&T and Verizon Communications Inc., into opening their technology for software-driven purposes. That could enable Google to jump into wireless with its Internet search and advertising services.
But once its goal was achieved, Google was expected to back out of the bidding. Now that a Microsoft-AT&T partnership looms, with all the Internet software power and vast content owned by that potential team, Google may be forced to rethink its strategy.
Cell phone video will take a giant leap when the new spectrum becomes available next year. Wireless is one area where Google can add revenues with its advertising machine. AT&T obviously needs new revenues to replace its shrinking landline business.
If Google plans to keep up with AT&T in providing new features for small screens, it may need to acquire some of its own spectrum, too, driving up bidding prices.
Regardless of how the maneuvering pans out, Microsoft has started a bold initiative. It will try to match on the Internet what it has accomplished in the software arena.
And San Antonio is hard-wired into this deal.
David Hendricks: dhendricks@express-news.net
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