Three Reasons Microsoft Paid So 'Little' For Facebook

An anonymous reader writes "Microsoft's $240 million investment is much smaller than the rumored $750 million that Facebook sought. Why the difference? Wired Epicenter's Terrence Russell analyzes the deal, and points out three good reasons why Microsoft got a 'bargain'. 'Microsoft Only Needs an Entrenched Position - Ballmer's plan to acquire 100 startups in 5 years is still sketchy, but we got the point -- Microsoft wants momentum. If the company is to go forward as planned then taking a small, strategic piece of Facebook makes sense. Microsoft's financial interests in Facebook's ad platform already exist, so it only makes sense to strengthen that tie as the hype builds.'"

Title is misleading

[ShiningSomething]

No-one in TFA is claiming that Microsoft should have paid more for the 1.6% share it bought. It's suggested that it could've sticked to the same overall valuation and paid $750 million for a 5% stake. It's still the same price, it's just that they bought too little. And that seems a fair question that does not deserve the scare quotes.

Re:Plans...

[lantastik]

Compare and contrast with the business plan of Steve Jobs, which I think can be summed up as "make great products"...

Since when? I was always under the impression it was "sell over priced gadgets to trend whores", or "hire a great marketing dept".

Re:Title is misleading

[moderatorrater]

I maintain that they didn't buy the share of the company, they bought the advertising rights and the ability to push silverlight. The advertising lets them get more people to push advertisements through them instead/in addition to google. If they do nothing but break even on all the publishing on the site, $250 million is a bargain for the kind of exposure they'll be getting.

Re:Plans...

[DECS]

In the past year, Apple stock has been +115%, vs Microsoft +7%.

But over the last five years, Apple stock has been +2270%, vs Microsoft +21%.

An in the last ten years, Apple stock has been +4314%, vs Microsoft +89%.

What "long term investors" would prefer to have been sitting on MSFT?

Microsoft has 80,000 employees, +95% market share, and competes in businesses outside of Apple, which only has 18,000 employees and ~3% worldwide market share. However, Apple is bringing in more than a third of Microsoft's revenues and making more than a quarter of Microsoft's profits, and is selling new Macs--which eat up direct sales of Windows PCs--four times faster than the industry.

So Apple is doing good.

Microsoft exploded in the 90s, reached supernova in 2000, and has been flat as a pancake ever since. Apple exploded in the early 80s and ran into problems in the mid 90s, but recovered during the dotcom years and has been among few tech companies to wildly outperform its 2000-era peak. Microsoft certainly hasn't.

Apple doesn't have any catching up to do; it was already a high flying major company when Microsoft went public in 1986. Seriously, what "long term investors" have been holding Microsoft stock since 1986 apart from Bill Gates?

What has Microsoft done for you lately?

How Microsoft Got Its Office Monopoly [roughlydrafted.com]

What You Expected, What You Got: Windows Vista Vs Mac OS X Leopard [roughlydrafted.com]

Re:facebook my ass

[Your.Master]

While you have a point, it's not always just so easy to keep in touch with people you care about -- and this is especially so when your lost high school friends fell out of touch a couple of years ago or so instead of a decade ago.

There was no post-secondary school anywhere near my hometown. We all scattered and we all moved and so we all fell out of touch at once. Our old phone numbers were no longer valid (those few with cellphones got a number local to their new locale). Too many of them had their email address nailed to their ISP and that ISP doesn't operate outside of the county (I had a mailcity account and mailcity went and deleted it -- fortunately I was one of the first to get a gmail invite). And a lot of people didn't even have email at the time. We couldn't inform one another of our new contacts because we all changed contact info simultaneously, all we knew was the destination University of each. It wasn't that people didn't work at it -- it was that there wasn't anything to be done about it. I'm socially awkward at the best of times, I hated losing those friends that I had spent so long forging anyway.

Not too many years later, and people reconnect. The ones that I'm not real friends with trade one message apiece or none at all, might not even bother filling in the "how do I know this person" field (or however it is presented). The ones that I was real friends with but no longer care about trade maybe a handful. And that special one or two people that you get back in touch with -- they are worth the time spent looking at the other couple hundred more dubious friend requests.

Maybe your situation is different. You have another reply talking about how he just goes to his friends' homes and forgets the others. Even if I knew how to find them that's a 5 hour trip best case scenario, and it's not because I purposely distanced myself from them. Now, I don't think I'm the common case either, but you seem genuinely confused as to why anybody would want this.