Big Market Acquisitions - Microsoft

Microsoft (MSFT), one of the world's greatest technological firms, was started in a garage in Albuquerque, New Mexico in 1975 by Bill Gates and Paul Allen. Five years later, Gates and Allen were hired to create the operating system for IBM's first personal computer (PC), which was followed in 1985 by the release of Microsoft's now-ubiquitous Windows software.

The company's initial public offering (IPO) took place on March 14, 1986, and was successful. A little time after the market started for business, the stock reached a high of $29.25 per share, before eventually closing at $27.75 per share. Microsoft had a market capitalization of $519.777 million at the time of the initial public offering. Some analysts referred to this as “the deal of the year.” By the late 1980s, Microsoft became the world’s largest PC software company.

While Microsoft originated as a software firm, it has now moved into many areas of the technology industry. The firm currently provides personal computing devices, cloud computing infrastructure and services, artificial intelligence (AI), and other products in addition to software. Much of Microsoft's growth has come through a series of modest and major acquisitions for tens of billions of dollars.

Following the acquisition of a market capitalization, Microsoft has gone on to buy over 225 firms, purchase shares in 64 companies, and divest itself of 25 businesses. One hundred and seventy-seven of the companies that Microsoft has bought are based in the United States. The financial specifics of the majority of these mergers and acquisitions have not been disclosed by Microsoft.

After making its initial acquisitions in 1987, it has acquired an average of six companies every year since that time. Between 2005 and 2008, the company acquired an average of more than ten companies per year, including 18 acquisitions in 2006, the highest ever in a single year. These acquisitions included Onfolio, Lionhead Studios, Massive Incorporated, ProClarity, Winternals Software, and Colloquis, among others. Twelve acquisitions totaling more than one billion dollars have been made by Microsoft: Skype (2011), aQuantive (2007), Fast Search & Transfer (2008), Navision (2002), Visio Corporation (2000), Yammer (2012), Nokia's mobile and devices division (2013), Mojang (2014), LinkedIn (2016), GitHub (2018), Affirmed Networks (2020), ZeniMax Media (2020), Nuance Communications (2021), and Activision Blizzard (2019).

When it comes to the ethics of mergers and acquisitions by firms as major as Microsoft, there are two basic schools of thought to explore. The proponents of merger and acquisition activity claim that the vast majority of mergers and acquisitions are ethical since they benefit society as a result of their existence. This argument asserts that mergers increase efficiency while also benefiting shareholders of both the acquiring and target companies. On the other hand, critics of merger activity argue that the motivation for purchasing other companies is nothing more than unfettered greed, which is reminiscent of attitudes toward large business during the 'roaring twenties' period. Consequently, from the opponents' perspective, merger activity is expected to result in significant economic harm to the country, as well as other negative consequences.

Vision and Mission

The execution of Microsoft Corporation's corporate mission and vision statements is the foundation of the business's success as a global computer technology company. The vision statement steers the development of the firm toward a desired future state. Microsoft's corporate vision covers what the corporation can accomplish for its customers, both individually and as an organization. The mission statement of a firm, on the other hand, outlines the overall strategic strategy that will be used to expand the organization and achieve the corporate goal. In its mission statement, Microsoft states that it strives "to empower every person and every organization on the planet to achieve more."  The corporate mission of Microsoft outlines what the company hopes to accomplish in order to empower its consumers. This alignment is critical for optimizing strategic decision-making, particularly in the face of intense competition from companies such as Apple, Google, and IBM, among others.

Key Acquisitions

Forethought

Forethought developed an application called Powerpoint, which allowed users of Apple Macintosh computers, which Microsoft was already the leading software supplier for at the time, to create overhead transparencies or flip charts using their computers. In the opinion of some industry insiders, such so-called "desktop presentations" had the potential to be just as lucrative as "desktop publishing" — the process of utilizing computers to lay out newsletters and other periodicals.

On July 30, 1987, Forethought was acquired by Microsoft, making it the company's very first acquisition. Microsoft rebranded the presentation application and it would later become known as Microsoft PowerPoint.

Hotmail.com

With little more than a year and a half on the market, Hotmail went from being an unknown to being the Internet's most popular free email service. With a reported 9.5 million mailbox users at the time of the transaction, according to Hotmail, the startup was acquired by Microsoft in December 1997.

In addition to providing users of the Microsoft Network with a new e-mail alternative, the purchase of Hotmail served as a showcase for Microsoft's other products, such as the scalability of Windows NT and the reliability of the Microsoft Exchange server. The acquisition pushed Microsoft closer to parity with the industry's leading mailbox provider almost immediately.

Skype

Skype Technologies was the creator of the VoIP (voice over IP) service called Skype, which had a limited presence in the enterprise communications market.

On May 10, 2011, Microsoft announced the acquisition of Skype Technologies for a reported $8.5 billion. With a purchase price that was 32 times the adjusted earnings of Skype, Microsoft appeared to have a great deal of confidence in its acquisition. Within Microsoft, Skype was designated as a new business division. Skype continues to provide its present offerings to users around the world, and it has been integrated into other Microsoft products in order to increase its reach.

LinkedIn

LinkedIn is the world's largest professional network, and its mission is to bring professionals from all over the world together to share ideas and opportunities.

The acquisition of LinkedIn.com by Microsoft was completed in December 2016. LinkedIn has a user base of more than 400 million professionals, which is a demographic that Microsoft needed to assist the development of its Office products and services.   In addition, the users of LinkedIn provided Microsoft with possibilities to further enhance its cloud computing and customer relationship management initiatives.

Activision Blizzard

As a gaming behemoth, Activision Blizzard has a portfolio of well-known and highly successful titles, including "Call of Duty,"" Warcraft,""Tony Hawk" and "Candy Crush" (which was purchased from King), among others.

On January 18, 2022, Microsoft completed the acquisition of Activision Blizzard for a total of $68.7 billion in cash, making it the company's most significant acquisition since its founding. Microsoft will become the third largest gaming firm in the world in terms of revenue as a result of the acquisition, which it wants to take advantage of by solidifying its position in a market that already has 3 billion consumers who enjoy video games.

Ethical Dilemmas

Controversies

Government Perspective

Microsoft's expansion, both organically and via acquisition, has also drawn the attention of authorities. After losing a US antitrust action, the corporation was required to split into two pieces in 2000. While the verdict was reversed, Microsoft was required in 2002 to follow important regulations to provide a more fair playing field in technology.

Microsoft and other mega-tech corporations are still being chastised for their size and market domination. In response to opponents' requests for giant tech corporations like Amazon (AMZN) to be broken up, the Federal Trade Commission (FTC) asked Microsoft, Apple, Amazon, Alphabet (GOOGL), and Facebook (FB) to disclose details on every acquisition they made between January 1, 2010, and December 31, 2019.

Response to Ethical Concerns

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Microsoft can continue to grow while maintaining its reputation as a trustworthy firm in the eyes of consumers and the software industry by reaching its own potential, not only in terms of generating new technologies, but also in terms of corporate citizenship. Microsoft will be able to move forward in its aim to empower individuals and organizations all over the world to fulfill their full potential if it improves the way it interacts with consumers and competitors in the marketplace.