5 ms·
> And I wouldn't bet on that since Microsoft surely sent a big team of their brightest cookies to make a valuation of the company. The same people who valued N
by blowski 10y ago
> And I wouldn't bet on that since Microsoft surely sent a big team of their brightest cookies to make a valuation of the company.
The same people who valued Nokia ($7.6 billion writedown) and aQuantive ($6 billion writedown)?
- matsur 10y agoDifferent people. Both of those acquisitions were in the Ballmer era.
- dpkrjb 10y agoDon't Microsoft own a fund? Wouldn't they realistically send the same team to value Linkdin and Nokia?
- deleted 10y ago[deleted]
- blackflame7000 10y agoWould you send the same people after the job they did last time?
- inopinatus 10y agoThis criticism is only valid if you can show that the due diligence team that worked Nokia also a) misreported the red flags / the enterprise value of the acquisition, and b) were responsible for mismanaging the post-merger integration. A good deal of M&A goes ahead despite the warnings from the DD team. Sometimes it's a matter of CEO ego, sometimes a strategic long shot overruling the red flags.
- alex_c 10y agoIt's easy (and fun!) to criticize in hindsight, but there was a strong strategic case to be made for the Nokia acquisition back then. Obviously it didn't work out, but given Microsoft's cash reserves at the time it wasn't even a particularly large gamble.
- dopamean 10y agoIt's not "criticism in hindsight." It's simply acknowledging that those same "bright cookies" can make mistakes.
- alex_c 10y agoFair enough. My point was that there's a difference between a valuation mistake and a calculated risk that doesn't work out - and it can be very difficult to tell which one's which, especially from the outside. Any acquisition can end up a failure because of integration issues, changing market conditions, failure to execute new products, etc. - it doesn't necessarily mean the original valuation was wrong.
- dopamean 10y agoVery good points. Thanks.
- sireat 10y agoI really did not see many people making a case for Microsoft's Nokia acquisition (here and in the business press). It seemed mostly negative.
- alex_c 10y agoWell, both HN and the business press are often negative - and on the surface Microsoft was buying a failing business, so it's a reasonable reaction. A case in favor of the acquisition might go something like this: 1. Microsoft was far, far behind in mobile, with little hope to catch up through internal efforts alone. "Winning" mobile had the promise to unlock a lot of new revenue across Microsoft's other business units, "losing" mobile threatened to restrict Microsoft to the stagnating desktop market. 2. The industry was already consolidating (Google buying Motorola), there was a looming patent war, Nokia was sitting on a ton of patents, and was one of the few (if not the only) good target left for acquisition. 3. CEO of Nokia was ex-Microsoft, so Microsoft likely had a good idea what they were getting. (Conversely, this could mean Nokia CEO knew exactly how to apply lipstick to a pig to get it sold). In short, limited time window to act, potential for dramatic growth for Microsoft if it works out, relatively small downside if it doesn't (IIRC the cost was something like 10% of Microsoft's cash reserves at the time). I'd take that bet to be honest. All of this is speculation of course (I have no inside knowledge), and it was clearly not worth it in the end, but I can understand why a decision like this might have been made.
- nl 10y agoNokia was a public company. Sure they paid a premium, but the valuation was defined by the share price. The problem with Nokia was with the disaster of Microsoft's mobile strategy.