microsoft-evil-threat.jpgThere’s a remarkable revision occurring in Silicon Valley, with the old business lore being edited so that Microsoft suddenly emerges as a friend — even after decades of being outcast as an aggressive bully.

Microsoft has long been known for its predatory behavior: It would strike a partnership with your start-up, to get an inside look at your technology — and then build an in-house clone to drive you out of business (Read Jerry Kaplan’s book Startup: A Silicon Valley Adventure, which contains staple description of Microsoft tactics ). There was the Netscape saga, when Microsoft scrambled to to snuff out that early browser by bundling its own Internet Explorer browser into its software — choking Netscape into eventual insignificance.

But now that Google has emerged as the all-pervasive menace, Microsoft has been transformed into an aging, less threatening knight, albeit with pockets and interests deep enough to help you against the Google onslaught. Microsoft’s alliance with Facebook — which calls for Microsoft to invest $240 in that company — has capped the transition.

Suddenly, those old stories of bad Microsoft are being labeled as so much fiction. Look at what Jim Breyer, venture capitalist at Accel Partners, and board member of Facebook, has to say: “Many of the stories of Microsoft putting start-ups out of business, historically, were simply false,” he tells Silicon Valley’s newspaper, the Mercury News in today’s edition. The stories were overblown — some of them myths, even lies — or excuses made up by various valley entrepreneurs such as Kaplan for why mediocre businesses never were able to succeed on their own. That is how it is being recast.

Not mentioned, too, is how Accel’s Breyer is partial. Microsoft has been an investor in Accel Partners (see Breyer’s account of why he brought Microsoft in as an investor). Microsoft, however, was not an investor in the specific Accel fund that invested in Facebook, so the software giant did not already own an interest in Facebook from Accel’s investment in Facebook a few years ago. Microsoft announced this week it had bought a 1.6 percent stake in Facebook, which despite the news it generated, is tiny — again, not making Microsoft that much of a threat.

Another investor in Facebook, The Founders Fund, also had reasons to favor taking money from the Borg in Redmond, Wash. The Founders Fund is run by a group of former PayPal executives, foremost among them by Peter Thiel, former PayPal CEO. They’ve watched on as Google has tried to attack PayPal with its own Google Checkout. There’s also Thiel’s competitive positioning. The Founders Fund is trying to emerge as a leading Silicon Valley venture firm, at a time when older firms Sequoia and Kleiner Perkins lay claim to the mantle of best venture capital firms, because of their backing of Google. There’s bad blood, too, between Thiel and his partners (Sean Parker, among them), on one hand, and Sequoia on the other, stemming from former skirmishes at PayPal and Plaxo.

Finally, it’s easy to forget all the antitrust lawsuits filed by Sun and others. Since then, Microsoft has settled left and right. This week, it dropped its legal battle with European Union regulators, agreeing to share technical information with rivals and reduce the royalties it charges.

Dan’l Lewin, who became Microsoft’s “ambassador” to the region in 2001, said making peace with Silicon Valley was part of the corporate strategy. “We normalized relationships with Sun. That was a milestone,” he tells the Merc, which summarizes Microsoft’s multiple moves to assuage the valley. Those include the building of a Microsoft campus here, Bill Gates’ giving millions to the United Way Silicon Valley and his donation, through his foundation, of $15 million, to the Computer History Museum in Mountain View.

So somehow, when we read of Microsoft’s great earnings performance yesterday, in which it earned $1.2 billion more revenue than expected, and boosted its margins — sending its stock up to $35.50, giving it a value at heights not seen since 2001 — it’s not with animosity anymore, but relief.

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