Why does Microsoft’s purchase of Danger make so much sense? Because it gives the software giant a solid platform in the fast-growing, consumer-focused smartphone market — without screwing up its business-focused Windows Mobile lineup.
Danger’s Sidekicks have caché with young urbanites, but they’re not nearly as popular as multimedia devices like RIM’s BlackBerry Pearl and Apple’s iPhone in the U.S., and Nokia (NOK) and Sony Ericsson devices abroad.
In Microsoft’s hands, Danger’s phones benefit both from the company’s broad software portfolio — future versions might be able to play lightweight Xbox games, Windows-DRMed video, etc. — and the massive carrier/retail distribution network MSFT already has for Windows Mobile phones. (And assuming Microsoft’s bid for Yahoo eventually goes through, Yahoo’s popular mobile software could make the tie-up even sweeter.)
Another plus: Because Danger doesn’t build its own gadgets, Microsoft can pick the manufacturing strategy that makes the most sense. For now, it can keep outsourcing devices to partners like Motorola (MOT), which also makes Windows Mobile phones. And later, if it wants, Microsoft can merge Danger’s gadgets into its Zune line — or use it as the basis for a portable Xbox that also makes phone calls.
Either way, Microsoft is a stronger competitor today than it was yesterday to Google’s (GOOG) Android platform (headed by Danger founder Andy Rubin), Apple (AAPL), RIM, Nokia, and other rivals. And Danger’s investors get an easy exit instead of the IPO they were planning.
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