Acceptance of Microsoft might grow

Will Microsoft finally become a Silicon Valley company?

It has always been the beast from Redmond. An outsider. The inspiration for many a Silicon Valley startup in the negative sense — everybody here wants to get rid of the beast or go around it.

Microsoft's bid to Yahoo has been a long time in the making. I say that because Microsoft has been trying to be a player in Silicon Valley for a while. Once upon a time, it was at war with the valley. Companies like Netscape were key players in the antitrust case against Microsoft.

To patch things up, Bill Gates and Steve Ballmer made diplomatic missions to the valley, where Microsoft has a 32-acre campus in Mountain View. "Let us be your friend" was their message.

Their 1,000-plus-person campus, a vestige of its WebTV acquisition, was an island in hostile waters. It's down the street from the Googleplex, where Microsoft people could mooch free food in the cafeteria.

It was a place where Microsoft could launch new initiatives, such as the hardware engineering for the Xbox 360 and the design of the IPTV software dubbed Mediaroom.

Microsoft added to that presence in the valley with acquisitions such as the $800 million Tellme Networks deal last year.

But Microsoft has never been a true player here. Intel, its main partner, helped stir up a lot of anti-Microsoft activity itself, investing in Linux startups in the past to diversify away from the Wintel duopoly. And Apple has had a hold on hearts and minds in many ways. Go to the schools and you'll see Macs installed by Steve Wozniak himself.

A Yahoo deal would put Microsoft front and center here. It would transform Microsoft where we would no longer be able to see Redmond with the same eyes.

A presence in the valley is critical for Microsoft because it allows the company to keep its fingers on the pulse of innovation. Maybe they want to co-opt the valley. Maybe they want to eliminate a rival.

Yahoo dug itself into this hole with its chaotic financial performance. Ballmer and other Microsoft executives say this deal will help them get scale on search advertising, publishing and consumer eyeballs.

All of those things are necessary to get the virtuous cycle together to try to catch up with Google. Looking at December's search query numbers from comScore, a combined Microsoft-Yahoo with 3.15 billion searches would still be smaller than Google's 5.63 billion.

The idea here is that Microsoft is trying to paint itself as one of us. It is creating an alliance against Google, the dominant player, the "don't be evil" company that is really evil because its so big (even though it is still much smaller than Microsoft).

Microsoft is trying to protect its Windows franchise, which is being threatened by Google in many different ways. Google is hosting many of its online services in the "cloud," or the Internet servers where you can log in to access everything that you need. That tends to make Microsoft software on the computer itself less relevant and less lucrative.

We're only in the early innings on things such as "cloud computing" or next-generation computer interfaces, search on cellphones and "real search," as Gates tends to call the collection of smart technologies that will get consumers better results than what Google offers.

At the recent Demo conference, a half-dozen startups were showing off ways to incorporate the opinions of your closest friends into search results, or new ways of looking at the visual results beyond just text on a page.

It's too early for me and other pundits to answer the question about whether it will work or not. This is a lot like the replay of the merger of Compaq and Hewlett-Packard, where the idea seemed like a good one but it took years to play out as smart or dumb.

But if the deal goes through in the second half of the year as planned, there is one thing we can say about Microsoft: It won't be a foreigner here anymore.

Dean Takahashi is a technology columnist at the San Jose

Mercury News.