Eyet Blogs: acquisition innovation

Showing posts with label acquisition innovation. Show all posts

Friday, February 8, 2008

A Bird (Microsoft Offer) in Hand Worth More than Two in Bush (Google+Yahoo)

What will Yahoo board decide this weekend? Or by early next week? Yahoo Inc. (NASDAQ: YHOO) was one of the Top 20 Innovators of The Innovation Index.

Will Yahoo ride into the sunset? A $44.6 billion offer is a bird in hand after all.

Is Google Inc. (NASDAQ: GOOG) playing spoiler to stall the pending Yahoo acquisition by Microsoft Corporation (NASDAQ: MSFT)? Why not! Google has nothing to lose, everything to gain from the deal falling apart, or taking years to consummate.

What options does Yahoo really have at this point?

1. Tough it out all alone - Obviously this is not working with the ever widening gap between Google and Yahoo. But as long as Yahoo is profitable, it can call its shots. It can do what it pleases. It can take the time it takes to turnaround. And if all that does not work, well, Yahoo can look back and say, we tried! Dell is trying hard to turnaround. Yahoo can too.

2. Get acquired by Microsoft Corporation (NASDAQ: MSFT), the 800 lb gorilla - Can it work? Lose the independence. Lose the freedom. Redmond and Silicon Valley. Unless Microsoft makes Yahoo an independent business. But after Microsoft shells out close to $23 billion or so in cash, would it have the luxury to let Yahoo run by itself. May be not! And who would run the show post acquisition? Jerry Yang or a Microsoft elected official?

3. Partner with the nemesis Google, the company that put Yahoo in this precarious position in the first place, and made it difficult for Yahoo to catch Google. - How will the partnership work? Google is already taking market share from Yahoo, and eventually seize 80% of the Search market - a position that will make Google a virtual lock for years to come. Why delay the inevitable? Can Google really be the friend Yahoo is seeking?

4. Merge with Amazon.com Inc. (NASDAQ: AMZN) or eBay Inc. (NASDAQ: EBAY) - this looked like a viable option. Merger of equals. Merger of friends. This may have been the best option, although time seems to be running out for this one. Neither Amazon.com nor eBay have come forth. And Yahoo may not have asked either. The world would have welcomed an eBay - Yahoo merger. That may have been the lasting legacy of Meg Whitman. But alas. Not to be.

So what will Yahoo really do at this point? Take the bird in hand, or place bets with Google or go solo? Microsoft has not really put a time pressure on Yahoo. But investors, customers, partners and employees are queasy on what decision Yahoo will take. And it's time! If Yahoo takes too long to decide, everyone will simply question the leadership at Yahoo. Yahoo must decide next week. Yahoo will.

Amazon.com, eBay, Google and Microsoft are Top 20 Innovators of The Innovation Index.

Invest in the Innovation Index Fund

We launched the new Innovation Index Fund in December, 2007 that invests in the Innovation Index and returned 66% in 2007, and 174% in the previous five years. If you want to learn more about the Innovation Index Fund, fill out your contact information at the bottom of this form: http://www.innovationindexgroup.com/invest.html

The Innovation Index Reports:

Invest in The Innovation Index - Invest in the brand new Innovation Index Fund
Introducing The Innovation Index Fund - Invest into The Innovation Index
Top 50 Innovative Companies in the world - 2007 Report on Top 50 Companies
Annual Report - Chapter One - Total Innovation Activity - 2006 Annual Report One
Annual Report - Chapter Two - The Top Innovator - 2006 Annual Report Two
Annual Report - Chapter Three - The Innovation Insights - 2006 Annual Report Insights
Innovation and Stock Performance Correlation - The Innovation Index and Stock Performance

About The Innovation Index

The Innovation Index introduced in December 2006 is a weighted stock price index of the top 20 Innovators in North America.

The Innovation Index returned 66% in 2007, and returned 174% over the previous five years (2002-2006). This assumes equal investment in each stock of The Innovation Index as of December 31, 2001. An average of $100 invested in The Innovation Index on December 31, 2001 returned $454 as of December 31, 2007. By comparison, $100 invested in S & P 500 returned 28% or $129, $100 invested in NASDAQ returned 34% or $136, and $100 invested in the Dow Jones Index returned 30% or $131 through December 31, 2007. The Innovation Index beats the S & P 500, NASDAQ and Dow Jones Index by more than seven times over the past six years.

Alphabetical list of the Top 20 Innovators of The Innovation Index for 2008 and their stock ticker symbols:

3M Company - (NYSE: MMM)
Amazon.com, Inc. - (NASDAQ: AMZN)
America Movil - (NYSE: AMX)
Apple Inc. - (NASDAQ: AAPL)
AT&T Inc. - (NYSE: T)
Best Buy Co., Inc. - (NYSE: BBY)
Cisco Systems, Inc. - (NASDAQ: CSCO)
Costco Wholesale Corporation - (NASDAQ: COST)
eBay Inc. - (NASDAQ: EBAY)
General Electric Co. - (NYSE: GE)
Google Inc. - (NASDAQ: GOOG)
Hewlett-Packard Co. - (NYSE: HPQ)
Intel Corporation - (NYSE: INTC)
International Business Machines Corp. - (NYSE: IBM)
Merck & Co., Inc. - (NYSE: MRK)
McDonald's Corporation (NYSE: MCD)
Microsoft Corporation - (NASDAQ: MSFT)
NIKE, Inc. - (NYSE: NKE)
Research In Motion Limited - (NASDAQ: RIMM)
The Proctor & Gamble Company - (NYSE: PG)

The Innovation Index will analyze the positions and standings of the Top 20 Innovators at the end of each year. For 2008, there will be no further changes in The Innovation Index.

Disclaimer: The Innovation Index Group, Inc. invests in the stocks comprising The Innovation Index.

IBM completes $5 billion Cognos acquisition, announces exciting new Information On Demand strategy

IBM (NYSE: IBM) is one of the Top 20 Innovators of The Innovation Index. IBM made several key announcements today regarding the completion of $5 billion Cognos acquisition:

An array of new and enhanced joint IBM-Cognos solutions, products and services from across the company that enable organizations of all sizes to gain better insights from their data, improve decision-making, and optimize business performance, including:

--  10 new and enhanced IBM solutions for banking, retail, healthcare,
government, life sciences and manufacturing industries.
--  Six pre-integrated IBM-Cognos product offerings that enable companies
to use business intelligence to improve overall business performance.
--  Information on Demand Infrastructure Services to help clients plan,
design and deploy a resilient enterprise data, storage and content
management environment.

IBM also announced a new capability called IBM Dashboard Accelerator software using Cognos "builder" that will help companies extract business data and present it in new, different and more meaningful contexts through their IBM WebSphere Portal applications.

Further, IBM re-iterated the importance of Cognos acquisition on Future Earnings per Share growth. The acquisition supports IBM's objective for earnings-per-share growth through 2010.

In a letter to IBM business partners, Ambuj Goyal, General Manager of Information Management Software, wrote:

"I am very pleased to announce that IBM has completed the acquisition of Cognos. Cognos will be integrated into the IBM Software Group as part of the Information Management division where the synergies and market messages are most closely aligned. The addition of Cognos complements IBM Information On Demand by unlocking the business value of information for competitive advantage, and further builds on leadership by IBM in delivering SOA solutions.

I am very excited about the opportunities that lie ahead for the combined IBM and Cognos organization. With our collective strengths, we look forward to accelerating innovation, creating value, and driving business success.

Cognos maintains a vibrant and growing Business Partner community, with deep skills, industry knowledge, and a roster of proven, scaleable solutions built on the Cognos technology. The Cognos product portfolio will continue to deliver significant value to IBM and our customers..."

Bottomline:

IBM spent five times Cognos annual revenue of about $1 billion to acquire Cognos at $5 billion. Without counting the integration, distribution and operational efficiencies that IBM provides, the Cognos acquisition will add at least $1 billion in additional revenue in 2008. Add to this $1 billion, the actual benefits that an IBM acquisition will provide Cognos customers, joint IBM and Cognos customers, and future customers of Information On Demand solutions. IBM has quite possibly found the diamond that could potentially generate $2 billion to $4 billion in additional revenue in the next three to five years if the global market for on demand information expands. Cognos could be perhaps IBM's dark horse over the next several years.

Invest in the Innovation Index Fund

We launched the new Innovation Index Fund in December, 2007 that invests in the Innovation Index including IBM and returned 66% in 2007, and 174% in the previous five years. If you want to learn more about the Innovation Index Fund, fill out your contact information at the bottom of this form: http://www.innovationindexgroup.com/invest.html

The Innovation Index will analyze the positions and standings of the Top 20 Innovators at the end of each year. For 2008, there will be no further changes in The Innovation Index.

Disclaimer: The Innovation Index Group, Inc. invests in the stocks comprising The Innovation Index.

References:

IBM Press Releases and Business Partner Communication

Monday, February 4, 2008

Is Google playing spoiler in proposed Microsoft acquisition of Yahoo?

On Friday, Feb 1, I wrote about how:
Yahoo will ride into the sunset after getting acquired by Microsoft

Microsoft Corporation (NASDAQ: MSFT) and Google Inc. (NASDAQ: GOOG) are two of the Top 20 Innovators of The Innovation Index. The Innovation Index closed 2007 with 66% gain, crushing the major U.S. indices. Yahoo Inc. (NASDAQ: YHOO) was a Top 20 Innovator in 2007.

Today, Google Senior VP David Drummond posted this response to the pending acquisition of Yahoo by Microsoft:

Yahoo! and the future of the Internet
Posted by David Drummond, Senior Vice President, Corporate Development and Chief Legal Officer

The openness of the Internet is what made Google -- and Yahoo! -- possible. A good idea that users find useful spreads quickly. Businesses can be created around the idea. Users benefit from constant innovation. It's what makes the Internet such an exciting place.

So Microsoft's hostile bid for Yahoo! raises troubling questions. This is about more than simply a financial transaction, one company taking over another. It's about preserving the underlying principles of the Internet: openness and innovation.

Could Microsoft now attempt to exert the same sort of inappropriate and illegal influence over the Internet that it did with the PC? While the Internet rewards competitive innovation, Microsoft has frequently sought to establish proprietary monopolies -- and then leverage its dominance into new, adjacent markets.

Could the acquisition of Yahoo! allow Microsoft -- despite its legacy of serious legal and regulatory offenses -- to extend unfair practices from browsers and operating systems to the Internet? In addition, Microsoft plus Yahoo! equals an overwhelming share of instant messaging and web email accounts. And between them, the two companies operate the two most heavily trafficked portals on the Internet. Could a combination of the two take advantage of a PC software monopoly to unfairly limit the ability of consumers to freely access competitors' email, IM, and web-based services? Policymakers around the world need to ask these questions -- and consumers deserve satisfying answers.

This hostile bid was announced on Friday so there is plenty of time for these questions to be thoroughly addressed. We take Internet openness, choice and innovation seriously. They are the core of our culture. We believe that the interests of Internet users come first -- and should come first -- as the merits of this proposed acquisition are examined and alternatives explored.

What do you, the Internet Users, think of this proposed acquisition of Yahoo by Microsoft? Is it unfair? Is it hostile? Does it kill Internet Innovation as Google is claiming? Does it take away the choice? Please respond to the open poll on this blog and provide your viewpoint on whether Microsoft should acquire Yahoo!

Bottomline:

Yahoo board will accept Microsoft's proposal this time around. This is one acquisition where Google is not going to try to outbid Microsoft. There will be intense negotiations between Yahoo and Microsoft on the future of Yahoo Search, key Yahoo properties such as email and Finance, and Yahoo employees. However, in the end, this would be too sweet a deal for the Yahoo board to reject. Yahoo will ride into the sunset!

Invest in The Innovation Index

We launched the new Innovation Index Fund in December, 2007 that invests in the Innovation Index and returned 66% in 2007, and 174% in the previous five years. If you want to learn more about the Innovation Index Fund, fill out your contact information at the bottom of this form: http://www.innovationindexgroup.com/invest.html

The Innovation Index will analyze the positions and standings of the Top 20 Innovators at the end of each year. For 2008, there will be no further changes in The Innovation Index.

Disclaimer: The Innovation Index Group, Inc. invests in the stocks comprising The Innovation Index.

Friday, February 1, 2008

Yahoo will ride into the sunset after getting acquired by Microsoft

Microsoft Corporation (NASDAQ: MSFT), the giant, the goliath, the conqueror, roared loud today. The roar was so LOUD that the effects of it were felt worldwide across all time zones, across all geographies. Out here, the roar provided a huge jolt to the Wall Street in the morning at 6:30 am, and then reverberated through out the entire day. No trip to Starbucks today! Strangely enough, the roar did not come in the form of a speech by Steve Ballmer or Bill Gates mightily touting the success of Windows Vista, it came instead in the form of a written plea, a note in the form of a press release that went out to the board, employees, and shareholders of a rival, a sort of a friendly takeover, almost a pat on the back, urging them to consider Microsoft's request to acquire them at 62% premium to the closing stock price. Kudos Microsoft! You have not only mastered the art of creating and preserving market leadership, now you have shown us how to acquire a large company and get the world behind you. Now, it's up to the board to decide.

Microsoft is one of the Top 20 Innovators of The Innovation Index. The Innovation Index closed 2007 with 66% gain, crushing the major U.S. indices.

Microsoft was in a friendly mood today, touting how great their rival is, perhaps even patronizing it. For the rival is no other than Yahoo, the company that got the Internet going, and is symbolic of the freedom and free spirit that embodies the Internet. Yahoo Inc. (NASDAQ: YHOO) was one of the Top 20 Innovators of The Innovation Index for 2007.

"We have great respect for Yahoo!, and together we can offer an increasingly exciting set of solutions for consumers, publishers and advertisers while becoming better positioned to compete in the online services market," said Steve Ballmer, chief executive officer of Microsoft. "We believe our combination will deliver superior value to our respective shareholders and better choice and innovation to our customers and industry partners."
"Our lives, our businesses, and even our society have been progressively transformed by the Web, and Yahoo! has played a pioneering role by building compelling, high-scale services and infrastructure," said Ray Ozzie, chief software architect at Microsoft. "The combination of these two great teams would enable us to jointly deliver a broad range of new experiences to our customers that neither of us would have achieved on our own."
The online advertising market is growing at a very fast pace, from over $40 billion in 2007 to nearly $80 billion by 2010. The resulting benefits of scale along with the associated capital costs for advertising platform providers make this a time of industry consolidation and convergence. Today this market is increasingly dominated by one player. Together, Microsoft and Yahoo! can offer a competitive choice while better fulfilling the needs of customers and partners.
"The combined assets and strong services focus of these two companies will enable us to achieve scale economics while reaching R&D critical mass to deliver innovation breakthroughs," said Kevin Johnson, president of the Platforms & Services Division of Microsoft. "The industry will be well served by having more than one strong player, offering more value and real choice to advertisers, publishers and consumers."

Is Microsoft playing the role of a savior, or the role of a pirate waiting for the best opportunity? Yahoo just announced the annual and fourth quarter earnings two days ago, and missed the earnings estimates, and saw its stock plummet more than 10%. Further, Yahoo co-founder and chief executive officer, Jerry Yang, said, "While we will continue to face headwinds this year, we believe that the moves we are making will help us exit 2008 stronger and more competitive and return to higher levels of operating cash flow growth in 2009." Yang was essentially telling the world and the investors to give Yahoo until 2009 to rebound, to turnaround. The investors simply balked and retreated. Hence, this provided Microsoft the best opportunity, at a time when the investors were fleeing thereby sending Yahoo stock at a multi-year low, and a shaken leadership who may look for the escape hatch.

In a letter sent to the Yahoo board, Microsoft explains the rationale behind the acquisition: "Microsoft's consistent belief has been that the combination of Microsoft and Yahoo! clearly represents the best way to deliver maximum value to our respective shareholders, as well as create a more efficient and competitive company that would provide greater value and service to our customers. In late 2006 and early 2007, we jointly explored a broad range of ways in which our two companies might work together. These discussions were based on a vision that the online businesses of Microsoft and Yahoo! should be aligned in some way to create a more effective competitor in the online marketplace. We discussed a number of alternatives ranging from commercial partnerships to a merger proposal, which you rejected. While a commercial partnership may have made sense at one time, Microsoft believes that the only alternative now is the combination of Microsoft and Yahoo! that we are proposing."

Microsoft articulates this further, "In February 2007, I received a letter from your Chairman indicating the view of the Yahoo! Board that "now is not the right time from the perspective of our shareholders to enter into discussions regarding an acquisition transaction." According to that letter, the principal reason for this view was the Yahoo! Board's confidence in the "potential upside" if management successfully executed on a reformulated strategy based on certain operational initiatives, such as Project Panama, and a significant organizational realignment. A year has gone by, and the competitive situation has not improved."

Make no mistake. Whereas Microsoft is willing to provide a steep premium of 62% and value Yahoo at a huge $44.6 billion, the real prize that Microsoft is going after is Google Inc. (NASDAQ: GOOG), another Top 20 Innovator of The Innovation Index. Microsoft accepts Google's dominance in the market of online search and advertising (it states this in its own press release), and Microsoft does not like it and is not willing to accept it. It has waited way too long, tried many different things with its own MSN and Live services, and yet has not made a dent in the Search market. And the lead has only grown. Google narrowly missed earnings in the latest quarter. Microsoft smells blood. If Microsoft acquires Yahoo, together they would own about 32% of the U.S. search market, still a distant second to Google's 50% plus market share. But, if Microsoft does not acquire Yahoo, and with Yahoo floundering, it may have to give up on the search market altogether. Which Microsoft is not willing to do!

So now the question of the day is "What if Jerry Yang and the Yahoo board reject Microsoft's latest overture?" Are they in a position to defend the rejection this time around? Yahoo shareholders are definitely salivating at the sweet offer, and would be unwilling to relent now. By going public, Microsoft has really put the acquisition in the hands of the investors and shareholders. How did Yahoo reply to Microsoft bid? Yahoo issued a press release indicating: "The Company said that its Board of Directors will evaluate this proposal carefully and promptly in the context of Yahoo!'s strategic plans and pursue the best course of action to maximize long-term value for shareholders." Yahoo was quick to point out that shareholders matter.

How would the deal impact Google? Last year, I talked about Google versus Yahoo - A tale of two cities and Google's growing market share; there were even talks on whether Yahoo can catch Google. Google will have a worthy nemesis in the short term, however, may prove to be a bigger winner in this particular battle in the longer term. It is quite possible that after Microsoft acquires Yahoo, even more users will switch from Yahoo and begin using Google services. Yahoo brand still represents a sort of enigma, the last man standing in the heated battle of Internet. Yahoo is the underdog that many users still like to use and embrace. However, with the takeover by Microsoft, this perception will change overnight. And Yahoo users may not stay with Yahoo, and go to Google. This could benefit Google even more. If Microsoft is to create a real market out of the Yahoo brand, it must embrace the Yahoo brand, and relinquish its own search to Yahoo eventually. Perhaps this should be Yahoo board's decision - only merge if Yahoo brand and Yahoo search stays.

Assuming Microsoft finds a way to pay for this large acquisition (Microsoft has proposed 50% cash or about $22 billion, and 50% stock), how would the $44.6 billion deal compare to the Top Ten Mergers and Acquisitions since 2000? It would not make it to the top ten list, however, will definitely make it in the top twenty. And it would be the largest acquisition by Microsoft ever, easily eclipsing last year's $6 billion acquisition of AQuantive.

The largest M&A deals worldwide since 2000:

Rank	Year	Acquirer	Target	Transaction Value (in Mil. USD)
1	2000	Merger: America Online Inc. (AOL)	Time Warner	164,747
2	2000	Glaxo Wellcome Plc.	SmithKline Beecham Plc.	75,961
3	2004	Royal Dutch Petroleum Co.	Shell Transport & Trading Co	74,559
4	2006	AT&T Inc.	BellSouth Corporation	72,671
5	2001	Comcast Corporation	AT&T Broadband & Internet Svcs	72,041
6	2004	Sanofi-Synthelabo SA	Aventis SA	60,243
7	2000	Spin-off: Nortel Networks Corporation		59,974
8	2002	Pfizer Inc.	Pharmacia Corporation	59,515
9	2004	Merger: JP Morgan Chase & Co.	Bank One Corporation	58,761
10	2006	Pending: E.on AG	Endesa SA	56,266

Source: Institute of Mergers, Acquisitions and Alliances Research, Thomson Financial

Bottomline:

Yahoo board will accept Microsoft's proposal this time around. This is one acquisition where Google is not going to try to outbid Microsoft. There will be intense negotiations between Yahoo and Microsoft on the future of Yahoo Search, key Yahoo properties such as email and Finance, and Yahoo employees. However, in the end, this would be too sweet a deal for the Yahoo board to reject. Yahoo will ride into the sunset!

Invest in the Innovation Index Fund

The Innovation Index will analyze the positions and standings of the Top 20 Innovators at the end of each year. For 2008, there will be no further changes in The Innovation Index.

Disclaimer: The Innovation Index Group, Inc. invests in the stocks comprising The Innovation Index.

Sunday, May 20, 2007

Microsoft Hits A Walk-off Home Run with AQuantive acquisition

Microsoft Corp. (NASDAQ: MSFT) waited until the ninth inning and two outs to deliver the walk-off game-winning home run with AQuantive Acquisition (NASDAQ: AQNT). microsoft is one of the top 20 innovators of The Innovation Index. And Microsoft delivered the home run in style: the home run did not just clear the field, the platforms and the bleachers -- it cleared the entire stadium. The home run hit was worth $6 billion!! And for AQuantive investors, a mouthwatering $66.50 a pop - all cash (no credit). Importantly, the offer was 85 percent higher than AQuantive's closing price of May 17, and 29 times the Seattle-based company's anticipated 2008 earnings.

This is by far Microsoft's biggest acquisition, easily eclipsing the previous acquisition by over $4 billion and a lot of change.

Web Advertising companies are getting plucked up in a hurry. This is the fourth Web ad acquisition since April 13, when Google announced the DoubleClick deal for $3.1 billion. WPP Group Plc agreed to buy 24/7 Real Media Inc. (NASDAQ: TFSM) for $649 million. Yahoo agreed last month to buy 80 percent of Right Media that it doesn't already own for $680 million. Why would Microsoft cough up $6 billion when it did not want to pay $3.1 billion for DoubleClick? Was DoubleClick a smart buy for Google? The multiple based on earnings before interest, taxes, depreciation and amortization that Microsoft is paying is almost double what WPP will pay for 24/7, Wachovia Capital Markets analyst John Janedis said in a note. AQuantive is more profitable and has a larger share of the market than 24/7, and growing faster than ValueClick Inc. (NASDAQ: VCLK).

Comparison between AQuantive, 24/7 Real Media and ValueClick

AQuantive is by far the largest company in revenue and revenue growth (estimated) in comparison to DoubleClick ($150 million 2006 estimated revenue), 24/7 Media, and Right Media($75 million to $100 million 2006 estimated revenue). AQuantive is poised to grow faster than ValueClick, and is increasing the marketshare over 24/7. AQuantive is smaller than ValueClick in absolute revenue, although has produced consistent Quarterly revenue growth in the last few quarters. For instance, in the latest quarter, AQuantive was the only company that grew over previous quarter's results. Both 24/7 and ValueClick's revenue declined from previous quarter.

Annual Revenue comparison

Although ValueClick's annual revenue is higher than AQuantive's revenue, AQuantive is estimated to grow faster and almost equal ValueClick's revenue by 2008.

Quarterly Revenue Comparison

Again, ValueClick's quarterly revenue is higher today than that of AQuantive's.

Quarter over Quarter Revenue Growth Comparison

This is where AQuantive really shines. It is by far showing a more consistent quarter over quarter revenue growth compared to ValueClick and 24/7.
Microsoft beat out other bidders for AQuantive, Chief Financial Officer Chris Liddell said on a conference call.

"This deal takes our ad business to a new level," said Kevin Johnson, president of the Microsoft unit responsible for online services, in an interview. "We're committed to increasing our slice of the $40 billion worldwide Internet ad market."

Microsoft has major catching up to do in the ad sales market. According to Bloomberg story, Microsoft's ad sales grew 23 percent last quarter, less than Google's 66 percent. Microsoft had $1.61 billion in ad sales in 2006, less than the $10.6 billion for Google, said Charles Di Bona at Sanford C. Bernstein & Co.

Google dominates the market for ads linked to search results by handling 48.3 percent of Web searches. Microsoft won 10.9 percent of U.S. searches in March, said Reston, Virginia-based ComScore Inc., which tracks Web use.

>>Because Microsoft trails in search ads, the company is trying to attack by convincing advertisers to focus to broader graphical ad campaigns across multiple types of media.
AQuantive, with about 2,600 employees, will help Microsoft garner more ad revenue from its MSN Web sites as well as newer areas for advertising such as the video-games, Internet Protocol television and Internet-based Office programs, Johnson said.<<

According to Microsoft:"This deal expands upon the Company's previously outlined vision to provide the advertising industry with a world class, Internet-wide advertising platform, as well as a set of tools and services that help its constituents generate the highest possible return on their advertising investments."
"The advertising industry is evolving and growing at an incredible pace, moving increasingly toward online and IP-served platforms, which dramatically increases the importance of software for this industry," said Steve Ballmer, chief executive officer of Microsoft. "Today's announcement represents the next step in the evolution of our ad network from our initial investment in MSN(R), to the broader Microsoft network including Xbox Live, Windows Live and Office Live, and now to the full capacity of the Internet. Microsoft is intensely committed to creating a thriving advertising business and to partnering closely with all key constituencies in this industry to help maximize the digital advertising opportunity for all."
According to Microsoft, the aQuantive acquisition enables Microsoft to strengthen relationships with advertisers, agencies and publishers by enhancing the Company's world- class advertising platforms and services beyond its current capabilities to serve MSN.

What is the new value generation?:
* Advertisers and ad agencies will benefit from a world-class media planning, buying and campaign management solution to drive maximum ROI and optimize their reach to audiences across the increasingly fragmented, interactive media landscape.
* Media owners/publishers will gain access to best-in-class inventory optimization and monetization solutions across a full suite of rich media, video and targeting capabilities.
* The broader advertising ecosystem will benefit from the leading interactive advertising agency, Avenue A Razorfish, continuing to serve its impressive client roster, while also embedding the voice of the marketer into Microsoft's next generation advertising solutions and services.

AQuantive brings three key innovation properties to the table:
* Atlas provides a set of advanced tools for both advertisers and publishers.
* DRIVEpm provides services to publishers and advertisers that match advertiser campaigns with publisher inventory enabling all parties to maximize ROI.
* Avenue A Razorfish is one of the largest interactive ad agencies in the world, providing advertisers with industry-leading digita marketing consultation, media planning and buying, and creative services that help advertisers use the online channel to build meaningful, profitable relationships with their customers.

Bottomline:

Better late than never. Microsoft waited to buy the best available digital marketing company in the present market. Perhaps Microsoft was smart to pass up DoubleClick.

AQuantive is a great buy for Microsoft because it:

1. Provides instant global credibility in the ad business with the three key properties; in particular Avenue A Razorfish.

2. Is Located a stone's throw away from Microsoft. Hence, the integration and collaboration will work like clockwork.

3. Catapults MSN business across various properties, provides MSN the shot in the arm that was needed to wake up and possibly have a go at Google Inc. (NASDAQ: GOOG).

References:
Microsoft Press
Bloomberg