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How Much Did Microsoft Pay For Danger?
Update: Microsoft is in some of kind of spending mood. First they offered up $45 billion for Yahoo (not enough for some!). And then there was that Danger acquisition. But how much did they spend on the Palo Alto-based company started by Android leader Andy Rubin? No one at Microsoft is talking, nor are the guys at Danger. So I spent most of my day yesterday dialing-for-information, and have come up with the price from a fairly solid source.
Microsoft spent a cool half a billion dollars ($500 million) on Danger, making it a nice payday for investors of the Sidekick maker. The half-a-billion number was first floated by good buddy Erick. While some of the early investors got modest returns, I am told that the later-stage investors made out like bandits. It has been reported previously that the company had raised $134 million in venture backing, but in reality it’s closer to $225 million $144 million. (Folks from Danger called and insisted that they have raised $144 million to date, and pointed to their S-1 filing, and for now I am going to defer to the published numbers.)
The deal’s big sticker price is intriguing — leading me to believe that Microsoft wants to pull an Xbox on its mobile phone business. Having realized that its traditional approach is going to relegate it to business market, Microsoft is taking a non-Microsoft tact, just like it did in the gaming console business. The reason for this deal is more than just acquiring “consumer expertise,” as the company kept repeating yesterday. Danger’s software-as-a-service technology can offer “Microsoft Services” such as Search, Windows Live Mail and Messenger on the Danger platform, using it to compete with Google Android.
I think if Microsoft wants to be really bold, they should go for a radical strategy: Instead of controlling the platform, they should make it open, thereby making it more attractive to developers. It would be the only way it can actually stay competitive with Linux-based platforms like LiMo.
Given that there are a couple of devices already on the market that use Danger software (unlike Android’s prototypes), Microsoft might actually be able to get some disgruntled Android developers switching to its platform.
Microsoft Buys Sidekick Maker, Danger
Update: That Yahoo thing is going to take some time, but acquisition-hungry Microsoft isn’t sitting idle. They have snapped up Palo Alto, Calif.-based Danger Inc. for an undisclosed amount of money. While they are not giving reasons as to why they are buying Danger, I am guessing that the user experience on Danger is a key factor. Danger, as you might recall, is the company behind T-Mobile’s Sidekick device, and was started by Andy Rubin, now leading the Android charge over at Google. The company raised over $134 million in venture funding from the likes of Mobius and Redpoint Ventures. It had planned for an initial public offering, but the recent downturn in financial markets might have prompted a decision to sell out to Microsoft.
I have followed Danger from its early beginnings, back in the day when I was a reporter at Red Herring. Despite having a great solution, the company never became a big player, highlighting the challenges facing a mobile startup, especially one with consumer ambitions. Of course there was the problem of being a closed environment and not fostering an application ecosystem.
The company still gets about 92 percent of its revenues from T-Mobile USA, and has been losing money. For its financial year ending Sept. 30, 2007, Danger had sales of $56 million and losses of around $28 million.
“The addition of Danger serves as a perfect complement to our existing software and services, and also strengthens our dedication to improving mobile experiences centered around individuals and what they like,” said Robbie Bach, president of the entertainment and devices division at Microsoft, in a statement. Microsoft didn’t outline its plans or the price it paid for Danger when I contacted them.
Update: I just got off the phone with Scott Rockfeld, Group Product Manager at Microsoft’s Mobile Communication Business. I tried to pin him down on why they were buying Danger and what kind of synergies were they expecting. All he would say was “In the short term we will continue the current product lines and we will work on trying to integrate the two platforms.” The motivation, as suspected was Danger’s consumer focus and consumer expertise. Clearly, Microsoft needs help and Windows Mobile has been relegated to the Business segment
