Microsoft announced Friday it is buying online ad agency aQuantive in a $6 billion cash deal, paying top dollar to buy into the suddenly hot sector. Microsoft paid $66.50 a share, an 85 percent premium over Thursday's close for aQuantive .
The deal is an indication of Microsoft's efforts to catch up in the growing online advertising space, and is just the latest deal in the sector, following recent moves by rivals Yahoo and Google.
"This deal takes our advertising business to a new level," said Microsoft Chief Operating Officer Kevin Johnson during a call with analysts Friday. "This allows us to take a bigger piece of that $40 billion pie that is still growing."
Microsoft executives said they were in a bidding war for aQuantive, although they did not identify the other bidder or bidders.
"We're happy with the price we paid. We believe it's exactly the right company to buy so we're willing to pay the value we are paying today," said CFO Chris Liddell. "We will use the strength of our balance sheet when we think it's necessary to drive growth going forward."
Liddell said the deal does not signal that Microsoft will turn more to acquisitions to keep growing in the future, although he added, "We certainly have the economic fire power if we decide to do more." Microsoft had about $28.2 billion in cash and short-term investments on its balance sheet at the end of the most recent quarter.
The earnings of aQuantive are miniscule for a company of Microsoft's size. The software giant reported net income of $14.2 million on revenue of $142.6 million in the first quarter when it released results last week. Microsoft executive said that the deal will not cause them to change any short-term earnings guidance.
The moves follow Thursday's deal by WPP Group, the world's No. 2 advertising firm, to buy online advertising company 24/7 Real Media for $649 million. Microsoft had been interested in buying 24/7 Real Media, according to some published reports.
Last month Yahoo bought the remaining portion of online ad firm Right Media that it did not already own for $680 million, while Google bought privately held DoubleClick for $3.1 billion.
Microsoft has raised anti-trust objections to the Google deal for DoubleClick, and on the call Friday Microsoft General Counsel Brad Smith said that the Microsoft deal for aQuantive by no means changes any of those objections.
"Microsoft today is in none of (aQuantive's) businesses," he said. "Google and DoubleClick have strongly overlapping businesses."
The traditional advertising agencies have also been making purchases in the sector.
Last month the Interpublic Group of Cos. announced it was buying a privately held marketing agency, Reprise Media Inc., for an undisclosed price. Paris-based Publicis Groupe (Charts) purchased online advertising company Digitas for $1.3 billion in a deal announced in December that paid a 23.5 percent premium.
Shares of Dow component Microsoft slipped 26 cents, or 0.8 percent, to $30.72 in early trading Friday, while shares of aQuantive shot up $27.63, or about 77 percent, to $63.50.
http://money.cnn.com/2007/05/18/technology/microsoft_aquantive/
0 Comments:
Post a Comment
<< Home