Meanwhile, Microsoft Buys Danger For $500 Million
Erick Schonfeld
53 comments »
While everyone has been preoccupied with the Microsoft-Yahoo saga, the Microsoft acquisition machine keeps on chugging along. Microsoft announced today that it has acquired Danger, makers of the popular Sidekick cell phone. I guess that Danger IPO isn’t happening after all. Terms were not disclosed, but its was in the process of trying to raise $100 million in an IPO. Now, the mobile platform company will be rolled into the Windows mobile team and be part of the overall Entertainment and Devices division that includes the XBox, and the Zune.
Here is the prospectus Danger filed with the SEC last December. In fiscal year 2007 (ended September 30), Danger had revenues of $56.4 million (up 14 percent), and a net loss of $12.4 million (double from the year before). It’s cumulative net loss since it started operations is $188 million. About one million subscribers (923,000) use a Danger mobile device—nearly all from T-Mobile. Investors include Mobius Technology Ventures, Redpoint Ventures, T-Mobile Venture Fund, Softbank Capital, Motorola, Meritech Capital Partners, and Venture Strategy Partners. The company has raised about $142 million in five rounds over the past eight years.
So Microsoft just bought a hip, but money-losing business. Is this Microsoft’s answer to the iPhone? Or is it an answer to Google’s Android? Hopefully, it is the latter.
Danger phones run Windows Mobile Danger’s OS, and they are among the most consumer-friendly Internet-capable phones, with a full slide-out keyboard. Microsoft could use the Danger handsets beloved OS and form factor as a platform to create a complete Windows Mobile experience with a much better IM experience than WinMo offers. That way, it could control both the hardware and the software, just like Apple does with the iPhone. But the mobile handset business is brutal. Look at Motorola. Microsoft would be better off taking all the software innovations Danger has created, and baking them into Windows Mobile, which will soon be facing competition from mobile phones running on Google’s open-source Android mobile operating system. If this acquisition was made to keep Windows Mobile one step ahead of Android, it was a smart move. (Of course, the irony here is that one of Danger’s founders, Andy Rubin, is now working at Google and is the man behind Android). If Microsoft is going to use Danger as its entry into the mobile device business, the chances that it will keep losing money in its hardware division are dangerously high.
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.
The appeal to Microoft is definitely on the software side here, although don’t be surprised to see mobile hardware devices such as Zune’s or xBox portables built on top of the Danger platform. Danger does a good job of keeping computing tasks on the mobile device to minimum, and doing most of the heavy lifting on the server side. WinMo devices, on the other hand tend to concentrate a lot of the computation on the device itself, which is why Windows smartphones are expensive and heavy. With Danger, Microsoft now has a mobile OS that can bring messaging and Internet connectivity to lower-end phones as well. Maybe the acquisition is just a realization that the mobile market is already partitioned between high-end and low-end devices, and this is a way for Microsoft to play in both.
But if Microsoft is now going to offer two mobile operating systems, it will make it more difficult for developers to choose which platforms to create their apps for. The main selling point of WinMo was develop once, and your apps can run on any WinMo phone. Now developers have to choose between two Microsoft mobile operating systems, plus Symbian, Blackberry, Android, and all the rest.
(via CrunchGear)
Not a bad purchase at all.
Is swearing allowed on this board? It’s not that this acquisition doesn’t make sense, it’s just that I wonder if it was really necessary.
wah? Does Andy Rubin (Android lead) still have ownership in Danger?
I think this acquisition happened just to ‘hire’ the Danger technical staff. Their platform is pretty solid. MS could use a little help with WMobile.
Makes sense to me. A dead-end product line that’s essentially different form factors of the same thing, a rather closed architecture and software distribution model, overall pretty much a sell-out to the carriers… seems like a perfect fit for Microsoft.
All the key players moved over to Android and then Google now anyway.
Can’t beat the IM client on the hiptop though… at least not yet.
With the way Liddell is buying things left and right, one thing is is sure MS stock will be going south for a long time. That guy is crazy. Can’t Gates ask his old buddy Buffet to be part time CFO for MS?
the xbox portable appears to to be taking shape?
I think you’re on to something, Ravi.
Danger’s phones do not run Windows Mobile; Danger uses an OS of their own creation, written in Java.
http://developer.danger.com/site/faq#q28
Who Said Danger runs Windows Mobile? I am just saying you are a smart bunch and MS could use you for mobile platform.
This could be a big buy, if they do the right thing and relaunch the brand with a monster ad push, and integrate it with Zune and the Xbox. Also have myspace and facebook native. This was the smart phone for the young hip and not tech savy.
It could be again if they advertise well?
A good move by mircosoft
“Is this Microsoft’s answer to the iPhone? Or is it an answer to Google’s Android? Hopefully, it is the latter.”
they dont have to answer to them, apple and google have to answer to ms you fucken fanboy
i really like Microsoft hardware (xbox, zune).
looks like they are taking the easy way with the phone product by just buying up a company.
also since danger is a hardware company this is another huge step for ms into hardware
Danger really doesn’t “make” hardware. They actually license to a few OEMs including Motorola and Sharp.
Correct me if I am wrong:
Wasn’t the founder of Danger the same fellow who is now heading up the Google Mobile OS project and board member of the OHA?
I know, I know, I should have researched this, but it’s early…I’m a lazy dog.
Duh, read the story! Sorry!
“…Danger phones run Danger’s OS, and they are among the most consumer-friendly Internet-capable phones..”
They won’t be after Microsoft is done with it:
http://www.youtube.com/watch?v=aeXAcwriid0
Can you say “Microsoft Zune Phone with Windows Mobile Ultra Professional Edition and Plus Pack”?
I agree with 13. bs
Aliens watching from outer space must think Apple and Google owns TC
Dear Team TC
Please match company with appropriate number.
Apple , Google, Microsoft
1. Monopoly 2. Has market share 3. Industry leader
From the TC about page, Arrington’s Bio
“I spent a few years as a corporate attorney at O’Melveny & Myers and Wilson Sonsini, working exclusively with technology companies. My clients included idealab, Netscape, Pixar, Apple and a bunch of startups, venture funds and investment banks.”
Is Apple still one of your clients?
Isn’t Woz still on Danger’s BoD?
Amusing!
(21-Ace: You forgot to add “All of the above”)
I hope they don’t touch my sidekick…. i’m in love with the keyboard. Sounds stupid, but it’s the perfect keyboard out there.
They probably just bought it for the street cred implied by your headline. I betcha Steve Ballmer has already made the “my middle name is Danger” joke.
Is this history repeating itself? Didn’t Andy Rubin also have big involvement in WebTV, which MS also acquired? Is MS doomed to continue buying Rubin’s work just as he’s on his way out?
Could Danger be the Android what SCO was for Linux?
Sidekicks have no value in the professional world so I think MSFT will do a major rehaul on this product.
It could control both the hardware and the software, just like Apple does with the iPhone. But the mobile handset business is brutal. Look at Motorola.
Looks like Microsoft sees the writing on the wall and doesn’t want to lose customer share as things move more and more to mobile devices. I wouldn’t be surprised to see them snap up a lot more companies in the coming years. Maybe Intrinsyc next?
http://www.tagsum.com/news/102.....uys-Danger
Yet again Microsoft’s insatiable appetite to dominate shows its partners that it is anything but a partner.
Why should Dell, HP support Windows when Microsoft increasingly encroaches into the PC space with Xbox.
Why should any handset manufacturer use Windows Mobile when Microsoft has itself entered the handset market.
Any smart manufacturer should be doing whatever it can to eliminate its dependency on Microsoft before it finds itself knifed in the back.
Trust Microsoft … no way.
Microsoft buys danger
From PE Week Wire:
Microsoft Corp. has agreed to acquire Danger Inc., a Palo Alto, Calif.-based provider of software and services for mobile handsets. No financial terms were disclosed. Danger has raised around $142 million in total VC funding since 2000, including a Series E round in late 2006 at a post-money valuation of approximately $187 million. Shareholders include Mobius Venture Capital (17.6%), Redpoint Ventures (14.8%), T-Mobile (12.6%), Softbank Capital (12.7%), Motorola (11.2%), Meritech Capital Partners (7.8%) and VSP Capital (6.2%). Danger currently is in registration for a $100.05 million IPO. http://www.danger.com
Those investors alone are 82.9% of equity and with all the liquidity preferences and particpation terms, the actual entrepreneurs and employees are going to walk away with very little.
MEANWHILE, RIM SERVICES DOWN IN U.S
http://whatisastockbroker.com/ My clients included idealab, Netscape, Pixar, Apple and a bunch of startups, venture funds and investment banks.
This just confirms that the hip factor of the Sidekick has definitely bottomed out.
how come no one is focusing on how Danger’s platform is Java up and down their stack? MS acquisition of Danger seems like a way to reduce competition from other platforms in the consumer space, take advantage of the Sidekick cachet to deploy some WinMo based solution and enhance the role of WinMo in the consumer space.
realistically does anyone think MS is going to add another platform to their mobile offerings, espcially one that is grounded in Java? no way!
“If Microsoft can get carriers other than T-Mobile to carry Sidekicks, it could become a very valuable franchise”
Other carriers do carry it but its not called the sidekick remember the Hiptop Tmobile owns the trademark sidekick ?
When I was in Europe, I was told that Gates and MS have investments in EU wireless tech and LG. Europeans are far ahead of the US in cell tech (thanks to Verizon). Instead of creating their own hand held — like Google — MS is buying expertise; probably at a huge discount. It makes sense. E
“Can’t beat the IM client on the hiptop though…”
The real trick is the behind-the-scenes IM technology. Microsoft may be trying to keep that from “falling into the wrong hands.”
The iPhone has the iChat (AIM) “look” to its text messaging (SMS) interface, yet has no true mobile IM capability. Since iChat is an integral of OS X, would Apple be interested in Danger just for the IM capabilities?
Microsoft could keep it from Apple/Google and use the technology for their own phones.
Other than that, I don’t see the Danger technology is revolutionary… anymore.
I am wondering if this is related to IP-battle between Microsoft and Google. There is a surprising similarities between Android and Danger OS’s VM.
http://satoshi.blogs.com/uie/2.....osoft.html
It could be beneficial to both sides, but at the same time it could hinder both of them. I just hope they dont try to change the look of it, if they put windows on it cool though!
I watched the video of T-Mobile Sidekick, screaming teenager.
umm…. it was actually $1.5 billion
I know that if I were microsoft, I’d want to buy a company like Danger. I feel like they’ve probably lost a nice chunk of their customers (especially younger and mobile customers) to apple since the introduction of the iPhone, and now things like the macbook air and such. And like Cliff says, hiptops “have no use in the professional world” (perhaps not completely true, but…), and they’re definitely targeted towards the younger market.
I’m very interested in the Android project though, I can’t wait to see how that turns out.
I’ve read that this will make them more competitive with the iPhone. I can’t help but wonder if they will actually be more competitive with the Blackberry. Two VERY different genres…
what was actually $1.5 billion…the price Micro paid for Danger? for a company that did not see profit for almost two years out…that would be a deal for Danger, but I would be surprised if that were the case. where does this device rank in sales? reminds me of a cheap electronic toy…but I am not in their demo graphic…so oh well.