The Price of Danger: $500,000,000


Microsoft just picked up Danger, inventor of the Sidekick mobile device and overall very clever mobile company founded by Andy Rubin who is now working for Google on Android and Open Handset Alliance stuff.

Om Malik is quoting the price as 500MM after what his reasearch showed was 225MM in past injections of capital.   

Although at first glance everybody thinks these deals make huge money for everybody associated with them, this is not the case.   As we’ve noted before average VC deals  *lose money*, and more importantly you always need to factor time into these equations to make sense of the profitability of a deal.

In this Danger sale people made out well, but depending on when the big money was invested it’s not clear anybody had a spectacular return here unless the big money came in very recently (I don’t know if it did or not).

Why would MS want this company?   As with the Yahoo aquistion and as MS has done for so long, they are trying to gain a huge foothold in key markets by buying up a key company in the space.    I’m expecting some competition for the Google/Dell phone to be announced soon.

       

Yahoo Executives – kudos for true believing, but sell the place anyway!


A lot of folks have been very hard on the Yahoo board and Jerry Yang in particular for fighting the Microsoft takeover bid, but it should be noted that almost more than anybody these folks are playing with their own money, and the stakes are huge.

As Fortune reports Jerry Yang’s got more than a few Yahoo shares, and this he’s effectively “gambling” with his own money as he powerfully resists the fat Microsoft offer.    If Yahoo stock tanks – as it certainly will if Microsoft backs out – I won’t be all that much worse for the wear but Jerry would be taking something like a *half billion* hit to his net worth.   That’s real money, and you’ve got to admire Jerry and the board for believing so strongly in their “new” vision for the company that they are willing to bet they can regain their former glory.  

Of course, maybe they *can* regain their former glory, but that’s a bird in the wild and wooly internet bush and Microsoft’s offer is *billions of birds* in the greedy little hands of investors.    This is not a tech issue – billions of Microsoft birds in hands are better than a few Yahoo birds in the bushes.   

Disclosure:  I have some YHOO, though fewer than Jerry Yang.

Yahoo + Microsoft? Heck yes says Legg Mason, with 6% of Yahoo


Larry Dignan is reporting that major Yahoo Shareholder Legg Mason is insisting that Yahoo make a Microsoft deal, though they hope and may expect MS to up the offer past 31 and up to 40, which Fund manager Miller stated appears to have been MS’s highest previous offer over the past year of flirting with Yahoo about a merger.

Miller says about Legg Mason’s position:

 We think this deal is a strategic imperative for MSFT, and that YHOO is in a tough spot if it wishes to remain independent.

Strategic imperative or not, Yahoo can’t expect investors to sit back and wait for something to happen when this much money is on the table.   In fact I think investors are already upset that Yahoo is basically suggesting this is their course of action – waiting for prosperity to fall upon them but not in the form of Microsoft.

I should say that given the market’s horrible reaction to the aquisition I’m not at all clear this is good for *Microsoft*.  If they screw up managing Yahoo and/or Yahoo can’t revived it’s sagging profitability fast this could go down as a Time Warner AOL fiasco kind of move for Microsoft.  However, if they want Yahoo I think Microsoft’s strategy from this point on can be very simple:

1.  Offer $34 per share publicly and loudly.
2. Call Legg Mason and other big holders, and tell them this is *OFF* if Yahoo keeps waffling.
3. Bring in fat lady to sing       ….         it’s over.

 Disclosed:  Long on Yahoo.