This week, Microsoft surprised a lot of people by buying Skype. I think most people thought Facebook would do it. Now I keep hearing pundits say that this will fail, because Microsoft buyouts always fail.
I’m sure some of them do, but none come to mind at the moment. But I can think of several Microsoft buyouts that worked out really well. Over the years, I think Microsoft has proven itself to be pretty adept at both cloning products and buying products. They don’t always improve them all that much, but they frequently remain popular.
Sometimes I think Microsoft is better at buying products than developing them. After you see this list, you might agree.
MS-DOS started out as 86-DOS, a product from Seattle Computer Products. Microsoft bought 86-DOS from SCP for $50,000, licensed it to IBM, and then offered to do the same for anyone else who wanted it. This little technicality made cloning the IBM PC much easier, since anyone could buy the same operating system. In a few short years, MS-DOS was the most popular operating system in the world, and it transformed Microsoft, which up to that point was mostly known for its programming languages.
Microsoft Office wouldn’t be Microsoft Office without this popular presentation program. Microsoft bought it in 1987 for $14 million. And you thought it was always a Microsoft product.
Originally it was called Network Courier. Then Microsoft bought it in 1991, renamed it to Microsoft Mail, and it eventually evolved into Microsoft Exchange. I still think Exchange’s popularity has much more to do with the Outlook e-mail client than it does with Exchange, but there’s no denying that Microsoft Exchange was successful.
Although it’s been supplanted by Microsoft Access, Microsoft bought Fox, a clone of the once-popular dBASE, in 1992, and sold them in parallel for 12 years. Foxpro was discontinued in 2004 and some of its functionality rolled into Access. It retains a following to this day, and during its heyday, became more popular than dBASE, the product it cloned.
It might be a stretch to call this a buyout or an acquisition, but SQL Server was originally a joint venture between Microsoft, Sybase and Ashton-Tate. In 1992, the companies went their own directions, but SQL Server continued to carry Sybase copyright messages until 1994. It’s an example of a product that didn’t originate completely within Microsoft, and today it’s one of Microsoft’s most lucrative products.
Visio was introduced by a company called Shapeware in 1992. Shapeware quickly changed its name to Visio Corporation. Microsoft bought Visio in 2000. It’s a niche product and always has been, but it remains the market leader in its category.
Microsoft tried to re-brand it and failed, several times, and Hotmail has a lot of competition from Yahoo Mail and Gmail, but it’s remained popular since Microsoft bought it in 1997. It may not be what all the cool kids use, but it has 364 million users, while Yahoo Mail has 280 million and Gmail has 191 million. In that respect, it could be the quintessential Microsoft product, couldn’t it?
Microsoft bought Frontpage from Vermeer Technologies Incorporated in 1996. It’s discontinued now, but for several years, it was one of the most popular (and most derided) Web development products. It’s discontinued, but it’s hard to call Frontpage a failure. It was popular in its day. The way web development was done changed, and the world passed it by. Had it remained a Vermeer product, it would have met the same fate.
This product is a conglomeration of technologies Microsoft developed in house and purchased from others, like Vexcel, Vicinity Corporation, and GeoTango.
When Compton and Grollier launched successful encyclopedia products on CD-ROM, Microsoft purchased non-exclusive rights to the Funk & Wagnalls Encyclopedia, called it Encarta, and it had a wildly successful 16-year run. Free online encyclopedias like Wikipedia were what finally did it in. As Microsoft knows well, it’s hard to compete with free.
Yes, even Internet Explorer is based on an acquisition. In 1995, Microsoft licensed Spyglass Mosaic, modified it some, and called it Internet Explorer 1.0. It wasn’t until version 7 that all the old Spyglass code was expunged. It was a runaway hit, at its peak controlling 95% of the web browser market. Depending on how you count, it’s down to 43% of the market now, but it still has more share than any of its other competitors.
Yes, Microsoft’s share price is relatively stagnant, and today they resemble the company they displaced, the IBM of the 1980s. I don’t think flubbed acquisitions are the reason for it. When Microsoft was growing, executives would get together on the golf course or other social gatherings, talk about what their companies were doing, and the next time they saw me, they’d ask why the IT department wasn’t implementing whatever Microsoft technology all their buddies’ IT departments were implementing. And usually you couldn’t get by with just implementing one product. You had to implement three, and the other two cost extra.
The last conversation I had like that was three years ago. And I’m in position now to get more of those types of questions, not fewer. The closest things Microsoft has these days to a hot product are Windows 7–which should be a given, since virtually every new version of a Microsoft operating system is a slam dunk–and Sharepoint. But Sharepoint doesn’t have the mystique of past Microsoft hits. I don’t like it, which is nothing new. What is new is that I have no difficulty finding other people who don’t like it either. And I do have a difficult time finding anyone who’ll take me to task for not liking it. When I say I don’t like Exchange, people give me a blank stare, like I just said I don’t like ice cream. It’s slow and it crashes all the time, but everyone but me likes it anyway. When I say I don’t like Sharepoint, I either get a mild it’s-not-that-bad, or an I-don’t-like-it-either.
Will Skype be a runaway hit under Microsoft’s ownership, like Powerpoint? Who knows. But its failure isn’t a guarantee either.