Learning from CEOs: M&A the Microsoft way

In 2007 Microsoft acquired aQuantive, a long time partner in the online space. One of the three divisions of this Seattle based company was the Atlas Ad Service, a technical solution we leveraged at MSN to sell the huge unsold inventory generated primarily by the Hotmail service. In those days, the company internal efforts to build a new ad server platform had faced tough times with several failed attempts, years of delays and new managers almost every six months. reverting to Atlas had proven to be a smart move who paid off in the entire network, improving our monetization efforts and generating substantial revenue.

On May 2007 Microsoft shocked the Internet community by announcing a $6.2B acquisition, the largest ever in Microsoft history at the time. Yesterday Microsoft announced a planned write-down for the same amount of money, more or less the equivalent of profits generated in a single quarter (the link to the official Press Release is currently broken). Not big deal in financial terms, even though it’s a lot of money. What was behind that acquisition? First of all, let me kindly remind to everyone that the $6.2B value had a 85% premium on the aQuantive stock price. Not a financial expert, but that tells me Microsoft was super determined to close the deal, and had big plans and expectations. Now we know how things unfolded down the road, with RazorFish – a second division – sold to Publicis in August 2009 for $530M, and the former aQuantive CEO Brian McAndrews leaving Microsoft at the end of 2008 after running the Advertiser and Publisher Solutions Group.

In few days from now Microsoft will share Q4 financial results including those of the Online division. Historically losses are in the range of $500M per quarter, a recurrent result almost since the inception of MSN ober 15 years ago.

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