Microsoft acquires Danger Inc.

Our sector has been abuzz since yesterday when Microsoft agreed to acquire Danger Inc., makers of the popular Hiptop/Sidekick handsets. The move represents a considerable strengthening of its mobile consumer division and indicates that Microsoft has a clear vision for the future of mobility.

I didn’t see this one coming, but I’m guessing not many did. Let’s recap. While the world was fixated of Microsoft’s proposed $43 billion buyout of Yahoo!, Redmond was quietly making moves to absorb Danger for an undisclosed wad of cash.

For Danger, the deal can yield only positive tidings. The company, noted for its T-Mobile branded Sidekick devices, has suffered considerable losses and the buyout, like the Yahoo! offer, is something of a lifeline.
Microsoft is likely hoping this deal will prove to be a significant force in shaping their mobile strategy during the Ballmer era. While Microsoft is competing well in the mobile sector overall — sales of Windows Mobile devices for the past six months have racked in at 14.3 million units, outnumbering Apple’s 4 million iPhones more than three to one — they still face considerable difficulties broaching the valuable young hipster community (giant Treos just aren’t cool).

I understand why Microsoft made the move but I question if it will be ultimately prove successful. Oftentimes mergers such as these benefit only the dealmakers and ultimately fail due to incompatible corporate DNA. The smaller, rapidly experimenting organization, quickly falling victim to the structured inner workings of the larger corporate machine. It’s a bit ironic when you consider the fact that the larger machine is purchasing the smaller entity precisely for its creativity; creativity which is, in large part, the result of its size and ability to maneuver without inhibition. Conversely, it is often this same diminished inhibition which contributed to the company financial woes in the first place. So there’s a little paradox to go with the irony.

Regardless, I sincerely hope Danger is able to beat the odds and create the long-term value Microsoft is looking for. I, and the rest of my industry, will be watching what transpires with an interested eye.