Hacker News Reader

Yup.

Especially when you consider that MS lost a lot of good talent by putting some hiring on hold and especially by forgoing nearly all raises, bonuses, and promotions for about 2 years during the recent economic downturn. Even while they had tens of billions of dollars in the bank. They should have used that war chest to project their strength while everyone else was showing their weakness. Instead they made a cowardly choice and drove a lot of good developers elsewhere.

The question is more, "Can Microsoft extract more than 1 billion (or whatever the exact purchase price is) + return on investment from this purchase?"

If they have ~1 million paying users, and have anywhere close to 3/user (considering some are on group licenses, some are in the 15/mo range), that's 36 million in revenue a year, with a potential total of much more.

Microsoft must believe they can grow the user base, be able to integrate it with existing products (sharepoint) that will drive upgrades, and extract more than a billion dollars of value.

In this case, I wouldn't bet against them.

You can bet that they'll integrate this with SharePoint. I don't necessarily think direct revenues from Yammer had anything to do with the decision. This isn't the first aquisition they've done this with - see Fast Search And Transfer a couple of years ago. The SharePoint product line generates huge revenues for Microsoft, so they could easily justify spending a lot of money on something like this.

So now we'll have another huge addition to this already humongous monstrosity. But I guess it's a good thing for Microsoft if they want to grow SharePoint into a SAP-like product that is everywhere and impossible to get rid of. Seems like a sensible purchase to me, although at a somewhat high cost. I think they paid 200MM for FAST a couple of years ago, for advanced search features.

Already done: http://www.marketwire.com/press-release/yammer-accelerates-m... in the section "Platform Growth":

Yammer released a number of key enhancements to its platform, enabling integration with a wide range of business applications:

[...] Yammer released a new version of its SharePoint integration, adding a highly secure, real-time social layer to the native SharePoint platform, making it social, mobile and engaging for enterprise employees.

$1b is a steal for Yammer. I'm surprised Yammer would take that right now considering it's current valuation and how bright its prospects are. It has one of the most efficient B2B customer acquisition schemes. Even with the culture mis-match, I suspect this will be a good acquisition for MSFT.

The Facebook IPO punched a temporary hole in their valuation. I think Microsoft got a modest steal due to that.

Yammer has already won their segment. Imagine owning a private corporate social network, spanning the globe, with paying clients. It's an extremely valuable segment.

Yammer has already won their segment.

Depends on how narrowly they define their segment. I've done a ton of customer development interviews with people over the past 8 or 9 months, exploring this whole "enterprise 2.0" space, and I've found that - by and large - most people haven't even heard of Yammer (or Jive, or Broadvision, or Lotus Connections, etc). My perception is that anyone playing in this space isn't even really competing with Yammer (or Jive or whoever) they're competing to convert current non-users of this kind of technology.

Do you have reliable information on Yammer's success? User numbers, revenue, etc.

http://www.marketwire.com/press-release/yammer-accelerates-m...

Guesses: 6 million users, 1 million paid, 2012 revs between $60-100m.

That's nice, it's still a pretty hefty valuation but if they're that profitable it's not as awful as I initially expected.

Microsoft has done some good investments and acquisitions in the past, and also some duds. The jury is still out on Skype.

http://en.wikipedia.org/wiki/List_of_mergers_and_acquisition...

http://techcrunch.com/2012/01/05/after-a-breakout-2011-yamme... says 2011 revenue was around $25 million.

Care to elaborate on their customer acquisition scheme?

Investors should scream at stuff like this. There may be a time when they're completely incapable of making a key future acquisition because they overspent on crap like this.

This feels a bit presumptuous to me. Beyond playing into sticker shock, you haven't provided any evidence that they overspent or neglected to investigate other options.

A "nice round figure" is suspicious. Shouldn't a well-researched investment cost an amount that sounds well-researched (i.e. a more precise figure and not something that seems rounded up to the nearest billion)?

How about some brief brainstorming on what else they might have done...

If I look at the rest of the company: shouldn't Microsoft be more interested in, say, shipping Windows 8 sooner and with more features? They could pay engineers $200,000 a year (a very nice salary) and contract FIVE THOUSAND of them for a single year with that billion dollars. I'm not saying that would be any more sane of an investment, but I can imagine quite a bit that 5,000 engineers could do: more work on robustness, more bundled applications, more hardware supported, more optimizations...tons and tons of good stuff. Heck, they could do all of that if they hired just 500 engineers and kept them for 10 years, instead of 5,000 contractors for a year. The scale of any billion-dollar investment is insane in those terms.

(This is an example breakdown only. Pick whatever breakdown you like if you don't think this is realistic. The point is, money goes a long way. Companies should take extra time to see if there isn't a better place to spend a few million.)

shouldn't Microsoft be more interested in, say, shipping Windows 8 sooner and with more features? They could pay engineers $200,000 a year (a very nice salary) and contract FIVE THOUSAND of them for a single year with that billion dollars

Something something Mythical Man Month something something

> Something something Mythical Man Month something something

if you remember (or read the actual article), the mythical man month says nothing about the problem you quoted. It is often mistakenly taken out of context to mean that more people on a project doesn't make it faster.

Mythical man month actually says that a project already running late, won't be completed faster by adding more people at a later date, due to communication, and coordination problems. If you planned out the work for 5000 people (a hellova plan!), then this problem won't occur...in theory.

A "nice round figure" is suspicious. In an article no not really, in real life sure. If the purchase price had been 1,192,456,786.36 it would have been reported as 1.2 billion because the 36 cents are an unimportant detail.

I think the more important thing is how long would it have taken for them to start from scratch and build Yammer. Integrating the Yammer team and Yammer's products is going to take time as well so there are several variables there that need to be compared not just a simple back of the envelope pay a few guys a few years sort of thing.

>A "nice round figure" is suspicious. Shouldn't a well-researched investment cost an amount that sounds well-researched (i.e. a more precise figure and not something that seems rounded up to the nearest billion)?

This sounds more or a fallacy and less of an argument to me.

Would a figure like $9,999,989,567 be better?

Microsoft is buying a highly successful business that actually produces real revenue and profit. What makes you think they didn't do an due diligence and instead just threw a number like 1.2 billion out? You have no evidence of this, and it makes absolutely no sense.

As a MSFT shareholder I have no problem with them doing this given that Yammer had between 50-100 million in revenue last year and dominates their market.

>> As a MSFT shareholder I have no problem with them doing this given that Yammer had between 50-100 million in revenue last year and dominates their market.

As a MSFT shareholder, I am interested in how they came to the 1.2B price. Between 50-100 million in revenue? Actualized revenue does grow and shrink. It is a fixed number. That is quite a spread. They might very well dominate their market, but how much is the market worth? What is its upside?

What about SP and Yammer joint market-share?

I imagine Microsoft took the intrinsic value of Yammer and added a stab at the value of the impact on Microsoft if a competitor, say, Google bought Yammer.

There's just too much we don't know, meaning that any comment we make here amounts to little more than meaningless speculation. Unless someone has a credible source?

I would like to see "SpaceX" as a measure. As in, "Microsoft has just acquired Yammer for 1.5 from-scratch space programmes". Just to put the real value of money into perspective.

Similarly, Valve Software was recently estimated to be worth around $3 billion...and they have a money-printing machine with Steam.

"Yammer sold for 1/3 of one of the most successful digital distribution platforms."

Throwing around $1B also signals that Microsoft is still around and still acquiring companies.

hey did this same thing with Aquantive (sp?), and shareholders didn't do jack. That acquisition had to be the biggest $6B wasted EVER.

Sadly, nothing you expect/want to happen will.

Just curious, what could shareholders do in a situation like this?

MS will always have the money while there are hard working companies paying them troll-patent royalties.