Mike McCue hasn't talked to Yahoo co-founder Jerry Yang since Microsoft ambushed the Internet pioneer with an unsolicited takeover bid. But McCue would like his...
MOUNTAIN VIEW, Calif. — Mike McCue hasn’t talked to Yahoo co-founder Jerry Yang since Microsoft ambushed the Internet pioneer with an unsolicited takeover bid.
But McCue would like his old friend to know that becoming a Silicon Valley subsidiary of the world’s largest software maker can work out well.
Becoming a cog in a corporate machine isn’t something McCue had in mind during the eight years he spent building Tellme, which makes the technology behind directory assistance and other voice-controlled services. It ranks as Microsoft’s largest Silicon Valley acquisition so far.
After Tellme began making money in 2004, McCue envisioned the Mountain View-based company would remain independent so it could eventually make an initial public offering of stock.
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But his feelings changed after Microsoft Chief Executive Steve Ballmer persuaded him to fly up to Seattle last year.
After being assured that Tellme would be able to retain its Silicon Valley office, identity and quirky culture, McCue negotiated an $800 million sale to Microsoft and agreed to stay on as general manager. It’s a decision he says he doesn’t regret 10 months into the marriage.
“We are pretty much doing everything we were doing before — just a lot more of it,” said McCue, 40.
Because of the vast differences in size, the Tellme deal isn’t an apples-to-apples comparison to Microsoft’s proposed $44.6 billion deal for Yahoo.
If the deal gets completed, as most analysts anticipate, combining Microsoft’s online services with Yahoo’s sprawling Internet franchise is expected to be a complicated and painful process that will probably involve significant layoffs.
In contrast, Tellme was so small, its payroll has expanded slightly to 360 employees.
But Tellme’s experience indicates that Microsoft’s pledge to preserve Yahoo’s brand, spirit and Silicon Valley presence may not be an empty promise.
Tellme’s warehouselike office about six miles north of Yahoo’s looks pretty much the same. Some workers dart down the aisles on scooters, and patio-style umbrellas loom over desks from doors bought at from Home Depot.
“We were a little skeptical when Microsoft first bought us, but they really do seem to value our talent and the DNA of our company,” said Sarah Caplener, a Tellme worker since leaving college seven years ago.
Caplener and other employees aren’t thrilled with the added layers of bureaucracy the Microsoft ownership has wrought. There are also regular trips to Redmond, a journey some don’t like.
But Microsoft’s executives sometimes make it easier by coming to Tellme. Chairman Bill Gates paid a visit last August and spent several hours swapping ideas with the Tellme engineers responsible for programming a system that provided voice-automated responses to about 2 billion phone calls last year.
The Gates session is one example why Tellme employees say they are helping Microsoft develop technology that’s more elegantly designed and easier for customers to use, said Peter Monaco, Tellme’s director of application engineering. “We feel like we are having as much of an influence on Microsoft as they are having on us.”
McCue’s background made it seem unlikely Tellme would ever end up part of Microsoft.
Before starting the company in 1999, McCue struck it rich as a vice president of technology for Netscape Communications, the Web-browser pioneer.
Netscape fell on hard times after Microsoft began bundling its Web browser into its ubiquitous Windows operating system, relying on tactics a federal judge later deemed illegal.
The U.S. Justice Department’s case against Microsoft was driven, in large part, by complaints from Netscape and other companies that contended the software maker had abused its monopoly power.
But McCue said he got over any hard feelings long ago as he got to know more Microsoft engineers and even hired some.
Even former Netscape CEO Jim Barksdale says he doesn’t hold any grudges against Microsoft. As an early investor in Tellme, Barksdale said he was thrilled when McCue told him about Tellme’s sale.
“I am one of Microsoft’s biggest fans,” Barksdale said. “They are a wonderful company, and their cash looked good to me. Every deal is different, but this one was great for Tellme.”