Microsoft identifies potential acquisition targets under four categories. Using these four categories, we can evaluate the strategic fit of the proposed acquisition of Sendit: 1.Distribution partners
Sendit acts as a distribution partner through its use of Windows as a base operating system for its mobile Internet networks. This expands the potential customer base for Windows, as each mobile network operator will essentially become an ISP with a Microsoft platform. 2.Companies that offer services
Amar Nehru describes his definition of service providers as technology solution providers and system integrators. The solutions provided by Sendit build on the internet, email and operating system solutions provided by Microsoft, and customers are charged in a similar way; both Microsoft and Sendit used subscriber based revenue models, whereby clients pay for services and upgrades on a per user basis. 3.Emerging technologies
Many in the industry believed that one of the next major telecommunications developments would be in the “convergence” of mobile technology with data delivery. (Page 2). Sendit’s technology uses mobile phones as a platform for Internet access, in a market environment where both mobile phones and the internet had ballooning subscriber bases. This links to the first mover advantage associated with acquiring Sendit. Due to large community and network effects, first movers would have significant advantage. Microsoft should move fast before competing technologies take charge of the market. Furthermore, Sendit has a lead in wireless technologies and data provision. Microsoft may want to incorporate this technology with other products. 4.Demand generation
In choosing Windows as the platform for its software, Sendit has the potential to establish Microsoft software as the standard for mobile Internet providers. This will therefore increase traction for the Microsoft platform, products and services in the marketplace.
Given that the characteristics of Sendit match the key criteria that Microsoft looks for in an acquisition on a general scale, we now look beyond this criteria to look at the business model and technological fit between the two companies.
Business model similarity
Sendit’s customers are Telecom companies, Cell phone manufacturers, and mobile phone users. In a business model remarkably similar to that of Microsoft, Sendit targets a community of users (by initially distributing client software free of cost) and thus become the de facto choice for all cell phone users that want to access the Internet. Once successful it can then obtain a steady stream of revenue through upgrades. The Sendit value chain
Threat of Digital Convergence
Wary of the trends towards digital convergence (that might diminish the market of PCs) , Microsoft has shown a strong interest in entering the business of wireless computing. It has made significant investments (such as Windows CE) and is trying to enter the business providing internet to cell phone users. Sendit is a product leader in this market. European Market Access
Microsoft will gain access to the European cell phone manufacturers through Sendit, as they already have several partnerships with market leaders in the region.
Microsoft has three possible approaches to building an alliance with Sendit: Share marketing and sales forces with Sendit
License from Sendit
Microsoft can also potentially proceed alone; but was lagging behind in related area research and so would need to invest significantly to bring itself up to speed.
We recommend a Strategic Alliance
Microsoft would favor a strategic alliance, if political, regulatory, or antitrust barriers limited Microsoft’s entry to the Sendit’s market. Our analysis revealed no substantial barriers, except for possible adverse market reaction to Microsoft’s public image, refraining Microsoft...