Saturday, May 19, 2007

Ack! As in Ack!quisition...

A is for Ack! As in acquisition of aQuantive (wow, now that is a five year chart).

Six billion dollars.


Holy crap.

In my opinion, this is a huge demonstration of fear, desperation, and dim-dog market tail-light chasing greed on our part. Every acquisition represents our failure to use our 70,000+ employee base to solve a solution or create a new market. Rather than buying back stock or pushing out a dividend, shareholder money got mis-invested in a hugely overpriced acquisition. And you're a shareholder why?

Seeing how much aQuantive is aligned with us and our technology stack makes you on the surface say, "hmm, yes, excellent strategic acquisition." Then you see the price tag (and goodness help you if you see it in the middle of taking a sip of something). "Who the hell is in charge here?" And of course, that reckless, desperate spending is now what disgruntled people will hold up as the paragon on executive spending, wondering why we're being so pound foolish while saving relative pennies for ESPP and other cut-backs.

Deal Journal - Bubble Wrap How Will Microsoft-aQuantive Be Remembered has this interesting gameplay comment from Steve Yuen:

Speaking of News Corp, its $5 billion offer for Dow Jones’ stable of premium brands is eminently rational compared against Microsoft’s $6 billion proposal for aQuantive. MSFT is playing checkers while GOOG plays chess.

24-7 Wall St. Microsoft Bid for aQuantive Signals Desperation

Shares of AQNT were trading at $36 yesterday and that quote was pricing in a lot of buyout speculation already. Somehow they got Ballmer and Company to offer more than $66 per share in cash, an 85% premium. Such a bid puts Mister Softy on the hook for a cash outlay of $6 billion. In return it gets a business at 104 times trailing earnings, 86 times current year earnings, and a whopping 67 times 2008 earnings.

The Key Why Microsoft's purchase of Aquantive is So Smart

Aquantive, through its Atlas division, has built the most advanced ad tracking and management technology out there. It can follow every detail of an online display ad--and help advertisers figure out where to target an ad and to whom with incredible precision. But Aquantive also tosses search data into the mix--and certainly it will do this more and more as part of Microsoft.

Microsoft agrees to buy aQuantive for $6 billion and Microsoft faced competition in aQuantive bid

"When Google bought DoubleClick, which is the prize here in the industry, it made Microsoft look more and more behind, and I think they just had to do something," said Tim Bueneman, senior vice president at McAdams Wright Ragen in Seattle and a devoted aQuantive investor who speaks highly of the company.

Even so, Bueneman said he "was just totally shocked" at the price, adding that it seems to reflect "a little bit of desperation" on Microsoft's part.

And of course there's the addition of the, what, 2,600 potential employees? Ah, screw it. If people haven't figured out that we have way too many employees by now I'm certainly not going to be able to help.

Post-Town Hall and myMicrosoft. Hey, was there a change in the way we're granted stocks? Man, what a wonderful demonstration of a small bit of poor communication that resulted in heated discussions. I think people are still trying to figure it out. Okay, backing up: I think it is great that the Town Halls happen, hopefully on a quarterly basis. It provides an important connection between executive leadership and the rest of us (and the potential for audience video cameos by [slick down the eyebrows, straighten the shirt] damn good looking Microsofties). This last one was pretty light in content, though; I would be just as happy with a few emails to skim through instead. It would be nice to have a big topic or two to cover in the future... things like:

  • Microsoft and The European Union: how is this going? This isn't just a thorn in our side but rather a bramble growing through our veins. And we hear very little directly from our leadership regarding how this is going and how we expect decisions and outcomes to affect the company.
  • Intellectual Property vs. Open Source: what's the strategy here? For the longest time, we've held off throwing punches here because we knew, although there are infringements, it would be costly to wage this battle on the public stage. What changed? GPL3?
  • Windows 7 and Office 14: how are the cash cows next iteration shaping up (I mean, I know, but I'd like to hear what leadership thinks)?
  • Windows Live / Core / MSN / Search: is this relatively detangled and figured out? So much groovy potential.
  • Zune / WMP / WMC and DRM: I know, no where but up for MP3 player market. Have we acknowledged the anti-DRM movement? Are we brave enough to take a step in that direction?

Regarding myMicrosoft: tweaks. Iterative tweaks that seem to be focusing on the tail-end of being a Microsoftie and not even getting close to undoing Mr. DiPietro's professional failings as an HR manager. The workflow evil, time-consuming career performance tools remain, they just get consolidated into one site. You can provide feedback up the chain and provide ad-hoc feedback for other people. The financial planning stock grant change. The ability to ship packages again-OMG that's awesome! Lisa I love you! I-ahem, eh, excuse me.

Hey, my gushing reaction to the return of employee shipping really surprised me: again, they're returning an easy benefit that was yanked away some time ago. An awesome, time and money saving benefit for those of us who ever have to ship packages. I still miss the flip-side to that coin: direct office delivery of personal packages shipped to me at work. Both of these save me time and help me get work done. Now, I have to occasionally clear my schedule so that I can work-at-home the day that my new personal laptop or handheld or some other package I have to sign for is arriving.

Oh, and Limited II? Well, now you're just a 10%'er. You were before, but because of the screwed up metrics not being well thought-out managers wanted to soften the blow for you ending up in the 10% bucket. I don't think we're going to introduce 10% II or 10%+ but I wouldn't put it pass HR once managers start seeing super valuable high-level employees that have plateaud dropping into the 10%.

But nothing about 15% ESPP or increased 401K or the MSPoll. Well, it was probably too early for the MSPoll numbers to be revealed, but... OUCH! I'd say anything below 60% requires action and anything - from the broad-Microsoft-as-a-company questions - below 40% requires executive leadership action. Or at least acknowledgement.

Some interesting comments to wrap up on: from the school of suck-up-your-salary-compression, T.Higgins shares:

As a person who has been with Microsoft for 8 years and contributed (in many public facing ways) to improve the perception of Microsoft in the developer community, I [was] provided information that shocked me. Actually, it makes me angry. A new hire straight out of college (read: no experience) will be compensated slightly less than I currently earn. Never mind that there is a $5000 signing bonus AND because there is, apparently, no space will be given the summer off before even swiping her badge.

Is it time to just give up stock compensation altogether and just give the people cold-hard-cash (or acceptable raises):

I think it's time for Microsoft to end giving stock awards to low and mid-level employees. Keep, and even bolster ESPP, but let's stop pretending that stock is a significant portion of the compensation package. It's been years since anyone worked harder because stock options were vesting. Let's admit to ourselves that there is now a rank and file at Microsoft; pay them commensurate to their value in the marketplace and even base raises on group/division profitability, but let's not pretend anymore that employees have an ownership stake in the company.

As a manager, it had become rather embarrassing to hand my L59-61 employees their pittance of shares. Incentivize people with promotions to technical leadership or partner jobs, and work to returning promotions to a merit system from the nepotistic buddy system in place today.

And one last one to reflect on our awesome compensation package vs. the potential raise you can get working beyond Microsoft:

I left Microsoft one year ago. my biggest fear when I made the decision to leave was the health benefit change. As you mention, no one even comes close to what you get at MSFT. Well, let me share my experience with you. Background - I have 3 kids and I am 35. I left as level 63 and made back then about $115K a year. I left because I got an offer (that most people at MS could get but just don't try) of about $180 a year.

My total out of pocket in health is about $1000 a year. So the math becomes very simple. you CAN MAKE much more outside of MS. There is so much going on outside.... benefits at MS are OK but JUST OK.

Striking my best Arsenio Hall pose here: "hmmmmmmmm..."

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