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Three Reasons Microsoft Paid So 'Little' For Facebook
An anonymous reader writes "Microsoft's $240 million investment is much smaller than the rumored $750 million that Facebook sought. Why the difference? Wired Epicenter's Terrence Russell analyzes the deal, and points out three good reasons why Microsoft got a 'bargain'. 'Microsoft Only Needs an Entrenched Position - Ballmer's plan to acquire 100 startups in 5 years is still sketchy, but we got the point -- Microsoft wants momentum. If the company is to go forward as planned then taking a small, strategic piece of Facebook makes sense. Microsoft's financial interests in Facebook's ad platform already exist, so it only makes sense to strengthen that tie as the hype builds.'"
No-one in TFA is claiming that Microsoft should have paid more for the 1.6% share it bought. It's suggested that it could've sticked to the same overall valuation and paid $750 million for a 5% stake. It's still the same price, it's just that they bought too little. And that seems a fair question that does not deserve the scare quotes.
Compare and contrast with the business plan of Steve Jobs, which I think can be summed up as "make great products"...
Since when? I was always under the impression it was "sell over priced gadgets to trend whores", or "hire a great marketing dept".
In the past year, Apple stock has been +115%, vs Microsoft +7%.
But over the last five years, Apple stock has been +2270%, vs Microsoft +21%.
An in the last ten years, Apple stock has been +4314%, vs Microsoft +89%.
What "long term investors" would prefer to have been sitting on MSFT?
Microsoft has 80,000 employees, +95% market share, and competes in businesses outside of Apple, which only has 18,000 employees and ~3% worldwide market share. However, Apple is bringing in more than a third of Microsoft's revenues and making more than a quarter of Microsoft's profits, and is selling new Macs--which eat up direct sales of Windows PCs--four times faster than the industry.
So Apple is doing good.
Microsoft exploded in the 90s, reached supernova in 2000, and has been flat as a pancake ever since. Apple exploded in the early 80s and ran into problems in the mid 90s, but recovered during the dotcom years and has been among few tech companies to wildly outperform its 2000-era peak. Microsoft certainly hasn't.
Apple doesn't have any catching up to do; it was already a high flying major company when Microsoft went public in 1986. Seriously, what "long term investors" have been holding Microsoft stock since 1986 apart from Bill Gates?
What has Microsoft done for you lately?
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