Microsoft, Motorola Weigh Desperate Measures - InformationWeek
04:58 PM
Richard Martin
Richard Martin

Microsoft, Motorola Weigh Desperate Measures

Two massive deals that have been talked about for some time got a bit closer to reality today, as Microsoft went public with its $44 billion bid for Yahoo and Motorola said it may spin off its handset division.

Two massive deals that have been talked about for some time got a bit closer to reality today, as Microsoft went public with its $44 billion bid for Yahoo and Motorola said it may spin off its handset division.Microsoft has made more than one approach to Yahoo in the past, the Redmond, Wash.-based software giant revealed this morning, and is now launching what will essentially be a hostile-takeover strike, at a price that is 62% over the current value of Yahoo's depressed shares. Motorola, meanwhile, has been pressured by shareholders, including activist investor Carl Icahn, to shed its struggling handset division, which since the runaway success of the Razr has proven unable to launch another hit device.

Motorola lost its position as the world's No. 2 handset maker to Samsung last year and is now threatening to drop to No. 4, behind Sony Ericsson. (Nokia is the leader, with a 40% market share.) Over the last few weeks a growing number of analysts have suggested that a rear exit from the handset business might be the best thing.

Microsoft's struggles in the online search and advertising arena, meanwhile, are well known. The Economist says that an MS-Yahoo hook-up would "transform the software and Internet-services industries." Of that I'm not so sure -- it looks like the desperate wedding of two limping partners, to me. It's very difficult to get people to change their search habits, and there's little evidence that Micro-Hoo (or Yah-Soft) could overtake Google.

Beyond that, these potential maneuvers, in two very different businesses, look structurally similar. MS-Yahoo and Motorola face falling share in a market with an 800-pound gorilla (Google and Nokia, respectively). All three have had trouble bringing significant new innovation to customers. A turnaround via organic growth looks unlikely for any of them.

I think the Motorola spin-off makes the most sense. No doubt Moto's board, and its venerable engineering team, would view with chagrin the loss of the iconic Motorola brand on consumer phones. But the sell-off would allow Motorola to focus on its other, flourishing units -- like enterprise networks, which grew by 35% last quarter.

Look at the sale of IBM's equally iconic personal-computer business to Lenovo, in December 2004. IBM's share price has risen 16% since then -- and Lenovo hasn't done too badly, either.

As for MS's bid for Yahoo, well, let's just put it this way: Microsoft's largest acquisition to date was its $6 billion purchase of online advertising firm aQuantive last year. That move was supposed to give Microsoft the ability to compete head-to-head with Google. How's that going?

Comment  | 
Print  | 
More Insights
Newest First  |  Oldest First  |  Threaded View
How Enterprises Are Attacking the IT Security Enterprise
How Enterprises Are Attacking the IT Security Enterprise
To learn more about what organizations are doing to tackle attacks and threats we surveyed a group of 300 IT and infosec professionals to find out what their biggest IT security challenges are and what they're doing to defend against today's threats. Download the report to see what they're saying.
Register for InformationWeek Newsletters
White Papers
Current Issue
Digital Transformation Myths & Truths
Transformation is on every IT organization's to-do list, but effectively transforming IT means a major shift in technology as well as business models and culture. In this IT Trend Report, we examine some of the misconceptions of digital transformation and look at steps you can take to succeed technically and culturally.
Twitter Feed
Sponsored Live Streaming Video
Everything You've Been Told About Mobility Is Wrong
Attend this video symposium with Sean Wisdom, Global Director of Mobility Solutions, and learn about how you can harness powerful new products to mobilize your business potential.
Flash Poll