Yesterday I found myself chatting with a former Microsoft programmer while here in Nashville and it was quite an eye opening discussion. I won’t drop a name because, well, because he only recently departed Microsoft. For obvious reasons this particular individual is not in position to be publicly speaking out against the company structure or internal business issues.

Our discussion was two fold… 1) I wanted to know his thoughts on the possible Microsoft purchase of Yahoo. 2) I wanted an insider opinion on Microsoft and its constant shortcomings.

1)It’s being reported in the Wall Street Journal that Yahoo has replied to the Microsoft offer saying it “substantially undervalues” the company. This is interesting to me because I don’t see a lot of companies lining up to make offers for Yahoo. And if Yahoo does end up selling at the current offer price, doesn’t that say to investors that Yahoo is indeed undervalued?

When I asked the former Microsft employee what he first thought when he heard of the offer, he said “I’m still kicking myself for not immediately buying Yahoo stock.” According to him, Microsoft is very serious about the deal and in his opinion Microsoft will eventually cut a deal for the company.

2)I brought up the success of open source, specifically Linux, Open Office, Firefox, Gimp, and other software that I use, and asked how Microsoft planned to address it. “Will Microsoft continue marketing overpriced products that already exist in the open source realm?”

I found his answer somewhat astounding. According to him, Microsoft has no interest in competing with open source for the individual consumer. Apparently, Microsoft is planning on shifting a LOT of its focus towards small business.

This to me is absurd. If Google and Open Office are both offering office suite products for free, why on earth would a small business pay hundreds and hundreds of dollars to be locked in to the Microsoft vortex? It makes no sense to me.

Then the discussion of innovation came up. Specifically, “why is Microsoft stuff in ‘me too” mode?” For example, every time Firefox comes out with a new feature… IE tries to follow along. When Apple cranks out a state of the art, innovative media device, guess who tries to follow along? I mean, am I the only one who remembers the Zune?

So, in the end I’m glad Yahoo has replied to Microsoft they they have. And I hope with everything in me they stick to their guns. While I believe Google needs strong competition and no one is currently providing it, a company like Microsoft would absolutely ruin Yahoo.

This is all my opinion of course…