Microsoft's Biggest Acquisitions And What Happened To Them

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Last week, Microsoft announced it would shut down the Sidekick service for T-Mobile customers, which it got as part of its $500 million acquisition of Danger in 2008.The shutdown put an end to Microsoft’s hopes of getting any value out of Danger, which was supposed to bolster Microsoft’s mobile phone strategy but culminated in the ill-fated Kin phone, which was canceled six weeks after launch.

But Danger was only the latest in a long line of acquisitions that didn’t go as planned.

Join us as we count them down from smallest to largest and describe the fate of each one.

Update: Added speech recognition company TellMe for a rumoured price of $800 million.

Number 16: Fox database software for $174 million

Microsoft bought Fox Software back in 1992 for a reported price of about $174 million. The company made the FoxPro PC database software, and Microsoft later used its underlying technology in JET, the database engine that still powers its email product, Exchange Server. The company still sells Visual FoxPro today, making this one of the few Microsoft acquisitions that contributed lasting value.

15: Groove (and Ray Ozzie) for $171 million

Groove made peer-to-peer collaboration software, but as Bill Gates later said, Microsoft really bought Groove for Ray Ozzie, who eventually replaced Gates as Chief Software Architect.

Microsoft was responsible for $51 million of a $150 million investment in 2001 that kept Groove afloat, and in 2005 acquired the remainder of the company for $120 million, making this one of the most expensive talent acquisitions ever. Ozzie announced plans to leave Microsoft in October 2010, and sent a stark warning memo on his way out the door.

14: Placeware virtual meeting service for $200 million (estimated)

Microsoft bought this privately held virtual meeting company in 2003, and turned it into Live Meeting. Next year, Microsoft plans to phase out Live Meeting in favour of Lync Online, part of the Office 365 suite.

13: Massive, in-game advertising, for $280 million (estimated)

Microsoft bought this company, which figured out how to place ads in console games, in 2006 for about $280 million. But in-game advertising never really took off, and last year Microsoft shut the unit down.

12: LinkExchange, an early paid search company, for $265 million

In a classic case of missed opportunity, Microsoft bought this early pioneer in paid search for $265 million in 1998. But as LinkExchange founder Ali Partovi (pictured here) explained in an essay for TechCrunch, Microsoft shut down the service a few months after launching it on MSN Search because it was scared it would cannibalise banner advertising. Whoops.

11: Rare, a game developer, for $375 million

Microsoft bought this U.K. game developer in 2002 for $375 million in cash. It took a few years, but the acquisition has probably paid for itself: Rare built the sports games for the Kinect motion controller, which launched last holiday season and immediately became a profitable $1 billion business for Microsoft.

10: Hotmail for $400m to $500m (estimated)

Microsoft bought one of the first Web-based e-mail providers, privately held HoTMaiL (the capitals spell out HTML, get it?) in 1998 for a rumoured price between $400 and $500 million. Hotmail is still around today, but Microsoft admits that it's basically a break-even business that is used to drive traffic to more strategic products like Bing and Office 365.

9: Greenfield Online, including price-comparison site Ciao, for $486 million

Microsoft bought this German company, which owned the Ciao brand of price-comparison shopping sites, in August 2008 for about $486 million. The site is still operating independently. In 2010, Ciao was one of the companies that complained to the European Union about how Google organizes search results, spurring an EU antitrust investigation into Google.

8: WebTV, an early Internet-on-TV company, for $425 million

When the Internet first became popular, Microsoft -- like a lot of folks -- thought that people would want to surf from their TV. To make sure it had an offering, Microsoft bought WebTV for $425 million in cash and stock in 1997. The product sold poorly, however, and a rebrand as MSN TV didn't help. Microsoft finally stopped selling MSN TV a couple years ago, and is focusing its living room strategy on the much more successful Xbox.

7: Danger, mobile software and services, for $500 million (estimated)

Microsoft bought Danger for a rumoured price of $500 million in early 2008 to help boost its mobile strategy. But the acquisition was botched by internal infighting -- while the Danger team was put to work on what eventually became the Kin phone, a separate group was building Windows Phone 7. The Kin launched late and with fewer features than specified, and was can celled less than two months later.

6. TellMe voice technology, $800+ million (rumoured)

Tellme provides automated voice technology for big customers like American Airlines and Verizon, as well as a free voice-automated business directory. Microsoft has also incorporated its technology into other areas, like Kinect. The companies never confirmed the price of the acquisition, but it was estimated at more than $800 million.

5: Great Plains accounting software for $940 million

Microsoft announced plans to buy accounting and business management software company Great Plains in December 2000 in a stock swap worth approximately $1.1 billion (the final value of the deal was reportedly around $940 million). The company turned Great Plains into its own division, Microsoft Business Solutions, and made its charismatic CEO Doug Burgum (shown here in his hometown of Fargo, North Dakota) into a minor star at the company.

At one point, executive Jeff Raikes thought that business would eventually contribute $10 billion in annual revenue. But in fact, the Business Solutions group -- now called Dynamics -- today accounts for about $1 billion a year in sales, and most of the growth is coming from Dynamics CRM, which Microsoft developed in house.

4: FAST Search and Transfer, enterprise search specialists, for $1.2 billion

Microsoft bought this Norwegian enterprise search company for $1.2 billion in cash in early 2008. Apparently a little more due diligence was needed -- the company was charged with accounting fraud and raided by police few months later. Despite the setback, FAST is becoming an important part of the SharePoint business, Microsoft's set of server products for collaboration and enterprise search.

3: Visio, design and charting software, for $1.3 billion

Microsoft bought this charting software company for stock worth about $1.3 billion in 1999. This one probably paid off: Microsoft still sells Visio and updates it with every Office release, and is estimated to have sales of several hundred million dollars a year.

2: Navision accounting software for $1.45 billion

Microsoft bought this Danish accounting and business management software company for $1.45 billion in cash and stock in 2002 to round out its Microsoft Business Solutions portfolio -- Navision was stronger in Europe while Great Plains (acquired in 2001) was stronger in North America. Of all the products gained in those two acquisitions, the Axapta software suite from Navision is probably the most successful, but the overall business unit never quite lived up to early expectations.

1: aQuantive, advertising software and services, for $6 billion

Microsoft purchased this company in 2007 to try and match Google's acquisition of DoubleClick -- and to keep it out of rival Yahoo's hands.

The Seattle-based company had a wide range of products for advertisers and publishers, as well as a digital ad agency, Avenue A | Razorfish. But the integration didn't go smoothly, and eventually Microsoft refocused its advertising strategy on search.

Most of aQuantive's leaders have left the company -- CEO Brian McAndrews, shown here, was gone by the end of 2008. Microsoft has used some of aQuantive's technology in its own ad platforms, but a lot of it was discarded, and Microsoft sold Avenue A for $530 million to ad conglomerate WPP in 2009.

But Microsoft did score a bargain with Halo creator Bungie

The most successful acquisition Microsoft ever made is not on the list: in 2000, it purchased Bungie Software for a rumoured price of between $20 million and $40 million. Bungie went on to create the Halo franchise for Xbox, which amounted to billions in revenue and helped establish Microsoft in the console business.

Microsoft also invested -- and lost -- billions in the late 1990s and early 2000s.

In addition to these huge acquisitions, Microsoft has invested billions in many other companies, including huge investments in telecom and cable companies like AT&T ($5 billion), Comcast ($1 billion), Titus in Japan ($950 million), and Korea Telecom ($500 million). It's harder to gauge the payoff from these investments, but Microsoft's plans to put its software in cable TV set-top boxes never happened, and the company had to take some huge write-downs in the early 2000s.

No wonder Microsoft doesn't make big acquisitions these days.

With this track record, it's no wonder that Microsoft hasn't made a big acquisition in the last few years -- in 2010, it only reported three acquisitons, all small private companies purchased for talent or intellectual property.

As CFO Peter Klein (shown here) told investors at a Morgan Stanley conference last week (transcript here), the company now looks at partnerships like the Yahoo and Nokia deals as a better way to get a leg up in relatively new businesses.

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