84 Comments

Summary:

[qi:110] Update: Microsoft is in some of kind of spending mood. First they offered up $45 billion for Yahoo (not enough for some!). And then there was that Danger acquisition. But how much did they spend on the Palo Alto-based company started by Android leader Andy […]

[qi:110] Update: Microsoft is in some of kind of spending mood. First they offered up $45 billion for Yahoo (not enough for some!). And then there was that Danger acquisition. But how much did they spend on the Palo Alto-based company started by Android leader Andy Rubin? No one at Microsoft is talking, nor are the guys at Danger. So I spent most of my day yesterday dialing-for-information, and have come up with the price from a fairly solid source.

Microsoft spent a cool half a billion dollars ($500 million) on Danger, making it a nice payday for investors of the Sidekick maker. The half-a-billion number was first floated by good buddy Erick. While some of the early investors got modest returns, I am told that the later-stage investors made out like bandits. It has been reported previously that the company had raised $134 million in venture backing, but in reality it’s closer to $225 million $144 million. (Folks from Danger called and insisted that they have raised $144 million to date, and pointed to their S-1 filing, and for now I am going to defer to the published numbers.)

The deal’s big sticker price is intriguing — leading me to believe that Microsoft wants to pull an Xbox on its mobile phone business. Having realized that its traditional approach is going to relegate it to business market, Microsoft is taking a non-Microsoft tact, just like it did in the gaming console business. The reason for this deal is more than just acquiring “consumer expertise,” as the company kept repeating yesterday. Danger’s software-as-a-service technology can offer “Microsoft Services” such as Search, Windows Live Mail and Messenger on the Danger platform, using it to compete with Google Android.

I think if Microsoft wants to be really bold, they should go for a radical strategy: Instead of controlling the platform, they should make it open, thereby making it more attractive to developers. It would be the only way it can actually stay competitive with Linux-based platforms like LiMo.

Given that there are a couple of devices already on the market that use Danger software (unlike Android’s prototypes), Microsoft might actually be able to get some disgruntled Android developers switching to its platform.

  1. Om,

    $500 million dollars is a “dangerous” price! (Sorry, I couldn’t hold back.) :-)

    Seriously, I disagree with your suggestion of MS opening up the Danger platform due to the fact that Danger could cannibalize WinMo sales. Now normally, I’d say that those are market forces, but in this case MS has a HUGE advantage with WinMo, seamless integration with the desktop. If MS can improve the user experience to the point where one’s true desktop is on their handset, that’s a near impossible advantage for the other mobile OS’s to overcome. I think this would be a better strategy for Balmer & Co.

    Share
  2. Curtis

    I agree with you to a large extent but I think one thing which can help danger platform: other apps and which can be brought through independent developers. I think it be interesting to see what they do.

    Clearly, the services (via Danger) supported by ad-dollars and the business market, those could be two different parts of Microsoft’s Mobile business.

    That said, $500 million. Big price.

    Share
  3. This line doesn’t make sense:

    “While some of the early investors got modest returns, I am told that the later-stage investors made out like bandits.”

    I’m guessing you mean the inverse of what you are saying here.

    Share
  4. Nope, it is what you read. some of their later stage investors had better terms than their early stage guys. If you want, I can point you to the SEC filings. That makes it pretty clear. ;-)

    Share
  5. Great detective work. I love the Danger Platform, but think that this is more about Microsoft gaining control over Danger’s IP for leverage over Google, than about integrating or extending what danger has done.

    Do you have any idea how many Danger shares are outstanding?

    Share
  6. Rog

    Here is a link to their SEC filings. linkI think you will get all the information you want about danger shares outstanding. if you have trouble finding it, let me know.

    Share
  7. [...] Update: After gathering a little more information on Danger, despite its history of losses, a lot of that was due to the way the T-Mobile contract is set up and how it has to recognize revenue from that. The company was on its way to becoming cash-flow positive. If Microsoft can get carriers other than T-Mobile to carry Sidekicks, it could become a very valuable franchise. The size of the deal (educated guess here) was likely in the $500 million range. Update 2/12/08: GigaOm comes up with the same figure. [...]

    Share
  8. I hate to be the one to say it, since I’ve suffered professionally at the hands of walled gardens more than once, but I think it’s just naive to continue to beat the “open handset” drum.

    All of the precedents in the wireless world point to the fact that mediocrity (via the walled garden) trumps glorious openness for one reason: assured profitability. While Apple makes a little bit of money on the iPhone even when it’s unlocked, they make a whole lot more on the 75% of iPhones that stay locked up in the walled garden — this whole concept was borrowed from the playbook of RIM, a company that has been vastly profitable playing within the walled garden.

    The only thing that can shake the status quo is a fundamentally new, altruistic player operating on new as-yet unallocated spectrum. But until that actually comes to fruition, don’t expect change from the big players or anyone who does business with them.

    (not bitter..) -Ian.

    Share
  9. Om: opening just the code of WinMobile is not enough. You also need to open ActiveSync, Outlook and Exchange to actually open the platform. This will amount to a revolution at MS.

    Share
  10. Om,
    I searched for pricing info yesterday and came up empty. Instead I tried to back into conservative estimate from public record docs The result I published was a range that topped out in the $330m range….I was trying to hit the lower side of the range, but if your source proves correct, I was much to conservative. Nice work in tracking it down.

    to Rog: the shares fully converted to common would have been 168.133million. There were 5 classes of preferred.
    Because Danger was planning a possible public offering, a lot of their corporate documents were filed with the SEC (as noted in one of the comments). Those docs are publicly available. Financials, exec comp, partnerships, cap table etc. It’s all there. You can go to the SEC or check the article on my site for a link to the specific filing if you are looking for it. Om may have posted the link in his coverage too.

    Share
  11. [...] figure, while not officially announced, was dug up in reporting by GigaOm’s Om Malik. We haven’t confirmed that exact figure, but we do have enough info that suggests investors [...]

    Share
  12. Thanks Om for the Edgar link. After reading the footnotes and capitalization sections, it seems that there were about 216 million shares (common and preferred, and esop) outstanding at the time of the IPO filing. It is a bit confusing, so I would be interested to see if you came up with a similar number… Rog

    Share
  13. [...] Malik puts the Om in GigaOM so when he says, “The deal’s big sticker price is intriguing — leading me to believe that [...]

    Share
  14. Thanks for the feedback Seth! I guess I misunderstood the S1. Rog

    Share
  15. @ Seth…. the price is $500 million. Got it from pretty reliable source.

    thanks for the share totals. helps

    Share
  16. [...] figure, while not officially announced, was dug up in reporting by GigaOm’s Om Malik. We haven’t confirmed that exact figure, but we do have enough info that suggests investors made [...]

    Share
  17. [...] approach would relegate it to the business market — a pretty safe assumption, if you ask us.  Read | Permalink | Email [...]

    Share
  18. Om,

    One thing you failed to consider in your analysis is what the Danger OS is really composed of. It’s Java up and down the stack. You can look more into this, but I highly doubt MS will add another mobile platform to their offerings, let alone a Java-based one. They may have purchased Danger to utilize the cachet of Sidekick with a very different audience than their typical WinMo consumer with the intent of repackaging WinMo in a way that appeals to the Sidekick demographic. People have made Windows Mobile look appealing (See NeoNode)

    I’ve read other suggestions that the perhaps it was the pursuit of IP conflated with Google’s Android pursuit that enticed MS to pony up $500M. MS has a big war chest for going to court if there are indeed IPR issues between Android’s architecture and Danger’s, which some claim to be similar (and both are authored by Andy Rubin).

    Regardless, I can’t see MS utilizing Danger’s phone platform in the long term… as such I feel pretty bad for the people at Danger heavily invested/attached to the technology. It seems to me that it will likely be phased out.

    Share
  19. [...] Read | Permalink | Email this | Comments [...]

    Share
  20. [...] Read | Permalink | Email this | Comments [...]

    Share
  21. [...] Read | Permalink | Email this | Comments [...]

    Share
  22. [...] – Sarah Perez – ReadWriteWeb Google Maps Street View Adds New Cities – Google Blogoscoped Microsoft Pays $500 million for Danger (Mobile) – Om Malik – GigaOm MTV Bringing Ads to Online Video Games – Tom Lowry – BusinessWeek Yahoo Layoffs [...]

    Share
  23. [...] GigaOm is reporting that Microsoft (MSFT) paid $500 million in its deal to buy Danger Inc., which makes the software [...]

    Share
  24. [...] want to buy Danger for $500 millions How Much Did Microsoft Pay For Danger? – GigaOM __________________ Research before you shot [...]

    Share
  25. Of course this is deja-vu for Rubin and Britt (ex-WebTV employees). Back to Microsoft again (for Britt anyway). I think the WebTV founder Perlman has a piece of Danger although, as the article mentions, early doesn’t mean a good payola in this case. WebTV had a superb exit strategy, 2yrs work for the payout vs 10yrs here. Still welcome news for the stakeholders I am sure.

    Now Dangers platform was/is a microkernel with Java running on it. I am sure they are hopeful that there won’t be any meddling but then who knows. Could be a Win platform in their future. (a complete wrench into their current plans I am sure).

    Share
  26. [...] Read | Permalink | Email this | Linking Blogs | Comments [...]

    Share
  27. The Danger has always been a better device than its marketing would allow. Young people really like it. But I wonder whether MSFT is the right buyer for a device young people have adopted. Youth is REALLY wasted on the old. More than on the young.

    BTW, glad to see you writing again, but take it easy.

    Share
  28. Too much money for that company. Microsoft seems to enjoy spending money on bad investments. http://www.tagsum.com/news/10311/Microsoft-said-to-have-dropped-500-million-on-Danger

    Share
  29. too much.

    Just another property for MS to run into the ground.

    When are they going to fire Ballmer?

    Share
  30. Thanks for the info — that’s useful to know.

    Rather than open up the platform entirely, the easiest thing for Microsoft to do would be to port the .Net Compact Framework to the Danger platform, expose some hooks into the underlying services, and encourage developers to write .Net apps for the platform.

    That way, they’re spreading their preferred development methodology, and at the same time, making it possible for developers to support both Danger and WinMobile without having to do a wholesale rewrite.

    Share
  31. [...] But it added another battlefront with the acquisition of Danger for an estimated $500 million. As Om Malik points out: The reason for this deal is more than just acquiring “consumer expertise,” as the company kept [...]

    Share
  32. Danger always intended for the OS to be open as a development platform. However, T-Mobile doesn’t like open platforms, so end of story from that angle. It wouldn’t take more than a flick of a switch from Danger and all kinds of cool apps would be released for the Sidekick family.

    There is certainly decent IP that MSFT is buying, which helps when Qualcomm, NTP, RIM and others are in the space. Android’s IP is likely inconsequential with respect to these other players.

    It’s funny, but people in the Valley still haven’t learned that Open in mobile doesn’t mean a darned thing until carriers are forced to accept it. The ONLY way that open will really happen is when new networks with 1/10th the cost per bit come on line and threaten the existing model. It’s possible that WiMax might be exactly that network, but remember that the two biggest WiMax players in the US are Sprint and Clearwire. McCaw owns Clearwire, and he’s no dummy and will clearly sell out in a minute to the highest bidder, which will invariably be AT&T, Sprint or Verizon.

    Share
  33. [...] based on Google’s Android platform (which is based on Linux). On top of that, Microsoft’s acquisition of Danger is being interpreted by some as a sign that the company might do a phone or platform competitive [...]

    Share
  34. I too think this move by MS is all about slowing down the momentum in the Android platform by threatening IP lawsuits.

    Danger as a device maker is pretty worthless.

    Ballmer is very aggressive.

    Share
  35. What did MS pay for? Danger WAS a platform way ahead of it’s time, but it never advanced… If they were getting Andy Rubin’s innovation, it would be a better story. There’s no way they will be able to compete with Android. The only thing I can think is that they overpaid so they could aquire some specific patent…

    Share
  36. Meg Whitman should’ve bought Danger. That way, combined with Skype, she could let buyers and sellers not just contact each other through VoIP, but through mobile VoIP in the future!

    Share
  37. Om thanks for the detail here – very interesting. With 225MM capital invested already the 500MM price tag seems pretty reasonable, especially if that VC money came in several years ago which would mean the annualized return on that VC money would be fairly modest.

    Share
  38. [...] According to Gigaom, Microsoft purchased Danger for a reported $500 [...]

    Share
  39. [...] news this afternoon has cast Microsoft’s acquisition of Danger in a whole new light. Microsoft spent $500 million on the pickup, according to GigaOM — a figure sure to raise more questions among Microsoft [...]

    Share
  40. Why Danger? Why not Palm? That way they can get larger market share atleast. Palm makes PalmOS and Windows mobile – which makes more sense and Sidekick(?)

    Share
  41. [...] figure, while not officially announced, was dug up in reporting by GigaOm’s Om Malik. We haven’t confirmed that exact figure, but we do have enough info that suggests investors made [...]

    Share
  42. Om,good work. Thats why they pay you the big bucks:)

    Hope your feeling well….

    Share
  43. [...] Read | Permalink | Email this | Comments [...]

    Share
  44. I have been a loyal Sidekick customer every since they first came out. I have had Sidekick 1, Sidekick 2 and now Sidekick 3. I am excited to see what Microsoft will do with the Danger products! It can only get better!

    Share
  45. [...] to Yahoo! for $44.6 billion, Microsoft also announced yesterday that they acquired Danger Inc.  GigaOM reported that the acquisition price was $500 million.  Coincidentally, Danger Inc. was co-founded by Andy [...]

    Share
  46. [...] the maker of the popular Sidekick from T-Mobile, was purchased for an undisclosed amount of money. Some people estimate as much as $500 million dollars, given that Danger has raised over $140 million in [...]

    Share
  47. [...] younger crowd and celebrities, due to its unique design that put a strong emphasis on easy typing. Om Malik is reporting that Microsoft spent $500 million on Danger, five times what the company was planning to raise in [...]

    Share
  48. [...] Read | Permalink | Email this | Linking Blogs | Comments [...]

    Share
  49. [...] Read the rest of this post Print Sphere Comment Tagged: Danger, Andy Rubin, Android, Om Malik, Sidekick, Microsoft | permalink [...]

    Share
  50. [...] Malik puts the Om in GigaOM so when he says, “The deal’s big sticker price is intriguing — leading me to believe that [...]

    Share
  51. [...] celej transakcie nebola oficiálne zverejnená, niektorí analysti odhadujú, že MS zaplatil približne 500 miliónov dolárov (ca. 11,5 miliardy [...]

    Share
  52. [...] ¹ Pare per una cifra attorno ai 500 milioni di dollari. ² Sulla scia di quanto visto con [...]

    Share
  53. [...] GigaOm found out the price and has an interesting analysis. [...]

    Share
  54. I have a completely different viewpoint on the Danger acquisition and would love to here people’s comments on this one. Yes the LiMo and Android thwarting is one thing, but why not think of the Sidekick as the potential of being Xbox Portable? No one could have predicted that in such a short amount of time, the Xbox platform would do so well. I think the Danger devices target a much younger generation that those who tend to purchase a WM handset.

    The other side of things is that Danger is not just a handset, it also requires a server backend. This is a similar strategy that Motorola took when acquiring most recently Good and a while back, 4th Pass.

    Microsoft also wants to use this acquisition, in my estimation, to also go after telco installs with their stack of products and at the same time, learning from the Danger server software that could potentially help. This area has been dominated by Sun and HP, surely Microsoft wants to play in this arena.

    Share
  55. [...] official details have not been announced on the Danger acquisition, Om Malik is speculating that Microsoft paid $500 million. Further speculation is that early investors got [...]

    Share
  56. [...] del desiderio è la Danger e sembra proprio che la trattativa sia già conclusa per la cifra di 500 milioni di dollari. [...]

    Share
  57. [...] purchase originally happened just a couple days ago, and now IntoMobile has gotten word via GigaOm that the software giant might have paid a cool half a billion dollars for Danger. The general [...]

    Share
  58. I think its a great acquisition. Danger receives monthly service fees from T-Mobile and revenue has grown from $49.3 million in the 12 months ended September 30, 2006, to $56.4 million for the same period in 2007, when data service subscribers reached 923,000.

    Share
  59. [...] ôïí online êüóìï ãéá ôéò áíÜãêåò ôïõ Áìåñéêáíéêïý êïéíïý. Ôï ðïóü åîáãïñÜò äåí Ýãéíå ãíùóôü áëëÜ ï GigaOM Ýìáèå üôé ðñüêåéôáé ãéá ðåñßðïõ 500 åêáôïììýñéá äïëëÜñéá, êÜôé ðïõ ôïí êÜíåé íá óêÝöôåôáé üôé ç [...]

    Share
  60. [...] has held that course recently, acquiring Danger (manufacturers of the Sidekick mobile device) for a reported $500 million. A $45 billion acquisition of Yahoo would certainly put a dent in that [...]

    Share
  61. [...] has held that course recently, acquiring Danger (manufacturers of the Sidekick mobile device) for a reported $500 million. A $45 billion acquisition of Yahoo would certainly put a dent in that [...]

    Share
  62. [...] Monday, Microsoft purchased Danger, the developer of T-Mobile’s Sidekick line. Om Malik estimated that Microsoft paid US$500 million for a mobile handset line that has a decent market [...]

    Share
  63. [...] lukaglobal wrote an interesting post today onHere’s a quick excerpt[…] How Much Did Microsoft Pay For Danger?, GigaOM […] [...]

    Share
  64. [...] about EU and Justice Department creating problems when it comes to the pending Yahoo-bid and the Danger-deal. Specifically, Microsoft is implementing four new interoperability principles and corresponding [...]

    Share
  65. [...] How Much Did Microsoft Pay For Danger?, GigaOM [...]

    Share
  66. [...] 以前IPO申請した際に取り上げたDanger社ですが、その後マイクロソフトが同社を買収、それを受けて申請は取り下げられました。ちなみに、買収額は明らかにされていませんが、$500M(5億ドル)とする見方もあります。 [...]

    Share
  67. [...] Microsoft has closed its acquisition of mobile software/platform maker Danger, for which it reportedly spent $500 million. [...]

    Share
  68. [...] is the maker of the Sidekick cell phone. Press Release | TechCrunch | GigaOm | [...]

    Share
  69. Danger always intended for the OS to be open as a development platform. However, T-Mobile doesn’t like open platforms, so end of story from that angle. It wouldn’t take more than a flick of a switch from Danger and all kinds of cool apps would be released for the Sidekick family.

    There is certainly decent IP that MSFT is buying, which helps when Qualcomm, NTP, RIM and others are in the space. Android’s IP is likely inconsequential with respect to these other players.

    It’s funny, but people in the Valley still haven’t learned that Open in mobile doesn’t mean a darned thing until carriers are forced to accept it. The ONLY way that open will really happen is when new networks with 1/10th the cost per bit come on line and threaten the existing model. It’s possible that WiMax might be exactly that network, but remember that the two biggest WiMax players in the US are Sprint and Clearwire. McCaw owns Clearwire, and he’s no dummy and will clearly sell out in a minute to the highest bidder, which will invariably be AT&T, Sprint or Verizon.

    Share
  70. about EU and Justice Department creating problems when it comes to the pending Yahoo-bid and the Danger-deal. Specifically, Microsoft is implementing four new interoperability principles and corresponding

    Share
  71. What did MS pay for? Danger WAS a platform way ahead of it’s time, but it never advanced… If they were getting Andy Rubin’s innovation, it would be a better story. There’s no way they will be able to compete with Android. The only thing I can think is that they overpaid so they could aquire some specific patent…

    Share
  72. [...] the maker of the popular Sidekick from T-Mobile, was purchased for an undisclosed amount of money. Some people estimate as much as $500 million dollars, given that Danger has raised over $140 million in [...]

    Share
  73. [...] source pas toujours fiable, mais si c’est vrai il reste du cash pour encore séduire Yahoo!. [GigaOM et TheInquirer en [...]

    Share
  74. [...] year there were three major deals adding up to over $600 million. These included Microsoft’s purchase of Sidekick-maker, Danger for $500 million. In the first half of 2009 there were quite a few acquisitions though many of them were small and [...]

    Share
  75. [...] report is bad news for Microsoft given that less than two years ago it paid a reported $500 million to acquire Danger, the developer behind the T-Mobile Sidekick. Microsoft’s 2008 [...]

    Share
  76. [...] left thousands of customers without their personal information, Danger Inc., a company Microsoft bought for about half-a-billion last year is fast becoming worthless. T-Mobile USA, its biggest champion (and arguably the biggest [...]

    Share
  77. [...] Om Malik reports a rumor that Microsoft paid US $500 million and offers a rationale for this largesse. Filed under Acquisitions, Coopetition, Danger, Inc., [...]

    Share
  78. [...] to GigaOM Microsoft shelled out a whopping $500 million for Danger, Inc. My guess is that they want to use Danger’s OS mobile service platform to integrate and [...]

    Share
  79. [...] accomplish that, according to Engadget, Microsoft went out and acquired Danger (for a purported $500 million), but then made a decision to retool the Danger Sidekick OS to Windows CE, which set the project [...]

    Share
  80. [...] pijnlijke beslissing voor Microsoft, dat het bedrijfje Danger kocht in 2008 (naar schatting voor een half miljard dollar), twee jaar ontwikkeltijd en heel wat marketinggeld in de Kin stak.  Danger maakte ook de Sidekick [...]

    Share

Comments have been disabled for this post