Why Did Microsoft Back Out Of Slack Acquisition?

Why Wasn't Slack Part of Microsoft's Growing Acquisitions?

(Continued from Prior Part)

Microsoft management and the Slack acquisition

Microsoft’s (MSFT) interest in Slack was primarily pushed by Qi Lu, the company’s executive vice president of applications and service. However, Lu’s optimism about a Slack acquisition didn’t sit well with Satya Nadella, Microsoft’s CEO (chief executive officer), and Bill Gates, Microsoft’s founder.

A possible explanation for Microsoft not going through with the Slack acquisition is the $8 billion price to put Slack under its umbrella. In April 2015, Slack was valued at $2.8 billion. Bloomberg’s recent estimates show Slack’s valuation at $3.5 million–$4 billion. Microsoft’s CEO and founder may have thought $8 billion—almost double Slack’s current valuation—was too high, at least in absolute value terms.

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Microsoft intends to make Skype competitive

While Facebook (FB) dominates the social network space, Skype is ranked as one of the leading social network players. Slack, although growing, still has a long way to go. According to Statista and as you can see in the above chart, Skype has 300 million active users, and Slack has 2.3 million subscribers. Microsoft’s management may not have thought Slack was worth $8 billion.

Microsoft has made numerous acquisitions to boost the functionalities and capabilities of Skype. It aims to make Skype competitive in the social network and messaging space. Microsoft acquired Skype for $8.5 billion in 2011.

Microsoft started 2016 with the acquisition of Event Zero, an Australian (EWA) management software company. The acquisition was part of Microsoft’s increased focus on Skype, as the Event Zero buyout would facilitate the expansion of Skype for business management tools and integrate capabilities with partner offerings.

In late 2015, before buying Event Zero, Microsoft announced the acquisition of Talko, a mobile messaging startup. Talko’s technology is expected to enhance Microsoft’s Skype functionalities. Talko is a developer of Apple’s (AAPL) iOS and Google’s (GOOG) Android apps.

Investors who wish to gain broad-based exposure to Microsoft can consider investing in the iShares US Technology ETF (IYW). IYW has an exposure of 46.7% to application software and invests ~12.2% of its holdings in Microsoft.

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Source : https://finance.yahoo.com/news/why-did-microsoft-back-slack-152434799.html

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