Microsoft's Yahoo bid triggers jitters, optimism

Microsoft's Yahoo bid triggers jitters, optimism

CHAMPAIGN – Only six months after Yahoo Inc. started operations in Champaign, folks around town are wondering what a possible takeover of Yahoo by Microsoft Corp. might mean for the local facility.

Some profess nervousness over another change in ownership, given that most Yahoo employees in Champaign were working for Motorola a half-year ago.

Others are encouraged by Microsoft's stability and the fact it already has research ties with the University of Illinois.

Fox/Atkins Development, which leases space to Yahoo in the University of Illinois Research Park, says it believes the Champaign facility has a future, regardless of which direction Yahoo decides to go.

"The communication we've heard from Yahoo is they still feel strongly that this operation will be important to the company going forward, regardless of what happens," said Laura Frerichs, vice president of business development and marketing for Fox Development Corp.

Frerichs said Fox Development founder Peter Fox met with a Yahoo vice president at the company's Sunnyvale, Calif., headquarters on Tuesday.

"There were no clear resolutions or decisions at that time, but he (the vice president) seemed to think this operation is still important and valuable to Yahoo," she said. "They're exploring several options. It's not a foregone conclusion that a Microsoft purchase would be the future direction."

Yahoo hired about 110 former Motorola employees last summer to staff its new technology center in the research park at 2021 S. First St., C.

The center works closely with research teams in Sunnyvale and Burbank, Calif., and focuses on infrastructure technologies related to operating systems and advertising products.

Yahoo has already started to expand operations here. It initially took a 13,800-square-foot suite on the first floor of the South First Street building, and in the next two weeks, it's expected to expand into a 4,500-square-foot, second-floor suite.

Together with commons areas, Yahoo will occupy a total of 22,000 square feet in the research park.

That's roughly on par with the two biggest space-takers in the park: Science Applications International Corp., which leases 23,000 square feet, and iCyt, which occupies 22,000 square feet, Frerichs said.

The Yahoo facility is "maxed out in terms of space, and there's real pressure in the research park to create space to house them," said Charles Zukoski, vice chancellor for research at the UI's Urbana-Champaign campus.

That's one reason the research park's board of managers is considering proceeding with plans for a new office building just south of the park's hotel and conference center under construction at First Street and St. Mary's Road.

Zukoski said if Microsoft's offer for Yahoo is successful, it could yield positive results for the Yahoo facility in Champaign – but he does have concerns.

Often, acquiring companies are seeking economies of scale and looking to shrink operations once the acquisition goes through, he noted.

"Of course, it makes us nervous," Zukoski said. But there are reasons to think the Champaign operation may flourish if Microsoft's bid succeeds.

"Microsoft sees in Yahoo a very valuable partner," he said. "In the popular press, it's portrayed as a way for Microsoft to compete with Google. Microsoft is not looking at a way to shrink operations, but to expand operations. There might not be pressure to consolidate operations."

Plus, if Microsoft buys Yahoo, the Champaign facility could become a "Microsoft outpost," he said.

"Microsoft hires a huge number of students out of the UI, and we have close ties with them in terms of human capital development – the students they hire – and in terms of the research they support," he said.

Redmond, Wash.-based Microsoft doesn't have a presence in town now, but if it buys Yahoo, "they may say, 'You know, we need to have strong ties with Illinois, anyway. Let's expand,'" he said.

Zukoski contrasted a prospective Microsoft-Yahoo combination with an auto industry merger.

"I don't know that it means we're somehow at threat here," he said. "It's not like Toyota buying GM, where if you were in Detroit, you'd really be worried. There's a different dynamic going on."

A spokeswoman for Microsoft declined comment on the future of the Champaign facility and said comment is restricted to what appears on the Microsoft Web site. That site indicates Microsoft believes a merger could result in $1 billion in efficiencies and savings.

Scott Pickard, director of the UI Research Park and manager of the EnterpriseWorks business incubator, said if the deal goes through and the Yahoo office becomes a Microsoft facility, it could be viewed as "a very good thing."

As was the case when Motorola closed its software development facility and Yahoo absorbed many of its longtime employees, "our first concern is with people, that they all be OK, that they all have jobs," he said.

"We're absolutely ecstatic that Yahoo is here," Pickard said. "But at the end of the day, what makes you successful is good people."

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