Microsoft, whose $44.6 billion bid was formally rejected by Yahoo Monday, kept its deal-making machine in gear with the acquisition of venture capital-backed Danger, whose software powers the Sidekick mobile phone.
The acquisition, whose terms were not disclosed, derails an initial public offering worth up to $100 million envisioned in Danger's government filings in December.
In Danger, Microsoft gets added firepower in its looming mobile war with Apple's iPhone, Google's Android coalition and other competitors.
The Sidekick, offered through Deutsche Telekom's T-Mobile, is a line of consumer devices designed for ease of message functions like e-mail and short-message service. Endorsements by celebrities like Paris Hilton and Lindsay Lohan haven't hurt, either.
The celebrity connection, however, became a double-edged sword in 2005, when hackers penetrated the T-Mobile network and published the contents of Ms. Hilton's A-list address book on the Web.
Microsoft's Windows Mobile operating system, meanwhile, is available on 140 smart phones designed to provide tools for users' work and home lives.
"Our approach is to create one phone for your entire life," said Sott Rockfeld, Microsoft group product manager. As part of that strategy, Mr. Rockfeld said, the company hopes to capture "the hearts and minds" of consumers as Danger has done "from Paris Hilton" to teens.
Miro Kazakoff, director, wireless devices, for Boston-based consumer research house Compete, said the Sidekick is one of the most avidly sought devices among online shoppers.
"The big thing Danger brings to Microsoft is a real brand name in mobile devices," he said.
Though Danger's software powers the Sidekick, the hardware itself is made by partners like Sharp and Motorola. The Sidekick brand, meanwhile, is owned by T-Mobile, which accounts for more than 90 percent of Danger's revenue.
Palo Alto, California-based Danger attracted backing from: Mobius Technology Ventures, owner of 17.6 percent of pre-IPO shares; Redpoint Ventures, 14.8 percent; T-Mobile Venture Fund, 12.6 percent; Softbank Capital, 12.7 percent, and Motorola, 11.2 percent.
Danger receives monthly service fees from T-Mobile and revenue has grown from $49.3 million in the 12 months ended September 30, 2006, to $56.4 million for the same period in 2007, when data service subscribers reached 923,000. Still, the company has yet to turn a profit, widening its net loss from $6.6 million in the 2006 period to $9.4 million for the 12 months ended September 30, 2007.
Late last year, Google unveiled a more-than-30-member consortium, for its Android smart-phone operating system, including T-Mobile and Motorola. Phones based on the system are expected to begin hitting the market in early 2009.
As expected, Yahoo's board Monday rejected Microsoft's unsolicited $44.6 billion acquisition bid unveiled last week. In a terse news release, Yahoo said the offer "substantially undervalues Yahoo! including our global brand, large worldwide audience, significant recent investments in advertising platforms and future growth prospects, free cash flow and earnings potential."
In a second government filing addressed to "Yahoos," Chief Executive Jerry Yang said the company plans: to grow visits on Yahoo online properties by about 15 percent per year; focus on creating a mobile strategy, and increase the percentage of the total online advertising demand we touch—to 20 percent of our addressable market over the next several years, from an estimated 15 percent in 2007.