How the Sidekick fiasco is Microsoft’s fault

By Felix Salmon
October 12, 2009
Dave Methvin:


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Is there an M&A lesson to be learned from the Microsoft/Danger/Sidekick fiasco? Here’s Dave Methvin:

Any $500 million acquisition usually comes with some technical due diligence. When Microsoft bought Danger, didn’t they have someone take a look at how the company ran their servers? During the more than 18 months since the acquisition, didn’t anyone review how Danger was operating?

The implication here is that the meltdown would have happened if Microsoft hadn’t bought Danger, and that Microsoft’s biggest mistake was not managing its acquisition more diligently. But Danger seemed to be perfectly good at cloud computing until Microsoft bought it — and then buried its founders so far down the org chart that one could easily forgive them for becoming somewhat demoralized.

It’s pretty obvious that company founders aren’t going to act with the same drive and sense of ownership when they’re a tiny part of a monster organization as they did when they owned and ran their own shop. Microsoft should have been on top of what was (and, more importantly, what wasn’t) going on at Danger, and been alert to defections and any hints of dissatisfaction in the team. Instead, it’s managed to deliver the single largest blow yet to the whole concept of cloud computing. And there’s lots of indication that Microsoft is at fault here:

Microsoft’s takeover of Danger almost two years ago should have given the software giant the time to fortify and secure Danger’s online operations. Instead, it appears the company actually removed support to cut costs…

Microsoft’s accountability in supporting its acquired SideKick support obligations with T-Mobile was also shirked… Microsoft could get more money from T-Mobile for their support contract if T-Mobile thought that there were still hundreds of engineers working on the Sidekick platform. As we saw from their recent embarrassment with Sidekick data outages, that has clearly not been the case for some time.

That indicates that Danger’s high profile cloud services failure didn’t occur in spite of Microsoft’s ownership, but rather because of it.

It’s not just that company founders lose zeal once they’ve been acquired; it’s also that executives at the acquiring company are often suspicious of what they’ve bought, especially when that company used to be a direct competitor. If you’re going to be spending billions of dollars on acquisitions, you should certainly invest a chunk of time and money ensuring smooth integration. That clearly didn’t happen here.

Update: Andrew Leonard has another idea:

Maybe we should consider this a Machiavellian shot across Google’s bow? What better way to defend the Windows/desktop franchise than to create a sense of fear, uncertainty and doubt concerning the fundamental security of cloud computing?

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