Professor Elam

Tuesday July 3, 2012

Microsoft overpiad for aQuantive – by about $6.2 billion of the $6.3 B purchase price. 

Companies must write down investments if they are not worth projected cash flows. aQuantive is an on line advertising uh whatever. MSFT bought this to compete with Google. Meanwhile Google paid half this price for Doubleclick and has made money. 

This is just the latest in a string of failed acquisitions for MSFT. The bloom is off the rose. At least Bill Gates was smart enough to know when it was time to declare victory adn leave. Steve Balmer has not been so fortunate. Knowing when to quit is important. 

Lucille Ball kept trying to be Lucy into her 70s, and it was a sad decline to watc. Carol Burnet on the other hand exited her successful tv show right at  the top, and has been in demand ever since. 

Was Gates smart, he usually bought off the competition, or just another guy in the right place at the right time who cashed in with a great IPO?

A dozen years of underperformance now marks both DELL and MSFT. Take a look.

DELL is the red black bars and MSFT is the solid black line.

Both traded at $42 12 years ago. Today Dell is less than a third of that at $12. MSFT at least has enjoyed a leisurely rise fomr its post 9/11 low. It does generate lots of cash but has been unable to effectively utilize it for new products or successful acquisitions. 

Here is an interesting ratio chart of PCs versus Macs.  Clearly this helps explain why Dell is in decline.