Print This Post

Microsoft Buys Danger

danger msftThe attempted acquisition of Yahoo is the big story but in smaller news Microsoft has fortified their mobile software efforts by acquiring Palo Alto based Danger Inc.

Danger is best known for developing T-Mobile’s Sidekick along with software and services that enhance multimedia and web functionality and cell phones. The company was founded by Andy Rubin who is now heading Google’s competitive Android mobile platform project

Microsoft’s Robbie Bach, president of the Entertainment and Devices division, said in a statement that “the addition of Danger serves as a perfect complement to our existing software and services and also strengthens our dedication to improving mobile experiences centered around individuals and what they like.”

As recently as December, Danger was in the process of preparing to go public.  A preliminary S-1 prospectus was filed with the SEC, and remains on file.

According to the financial data disclosed in that document most of Danger’s revenue comes from T-Mobile (more than 90%).  For their 2007 Fiscal year they had revenue of about $56m and losses of$28.1m.  Other details:

•Danger has taken approximately $144m in investment and is carrying an accumulated operating deficit of $188.1m. 

•Danger’s 5 largest shareholders were:  Mobius Ventures (17.6%), Redpoint Ventures (14.8%), T-Mobile Ventures (12.6%), Softbank (12.7%) and Motorola (11.2%).

•In September, they had $13m in cash and loan facility available that could provide up to an additional $12m.  Cash flow used in operating the company was only $6.4m in 2007.

Based on those numbers, Danger could likely have remained independent for at least a year.  That suggests the purchase wasn’t driven by an immediate cash crunch.

As for purchase price, no details have been provided but an educated guess would put the price at least in the range of $210m to $335m, and possibly higher.

That pricing range is extracted from two factors.  First, Danger had a reported (PE Hub) post money valuation of $187m after closing their Series E Financing in late 2006.  Given the company still has cash reserves to last more than a year, and appears to be sound, it’s likely the valuation is above that number.

Additionally, the S-1 prospectus provides capitalization detail that can be used to back into a number with more detail.  Specifically, the price guess is extracted by taking the most recent common stock fair market value of 65 cents a share (for options granted in September 2007) and increasing that price per share by 125% and 200%.   Those factors provides prices that account for both progress in operations and primarily, the conversion of the five classes of higher valued preferred stock into common.   Multiplying those prices by the number of outstanding shares (168.133m), again, when all converted to common, yields the range. 

(Note: as a private company, with potential shareholder pressure for liquidation, the pricing range is at best a guess. Even if reasonable accurate in valuation, it’s equally realistic that shareholders concerned with the economic climate were willing to take a loss on their investments rather than risk the company running out of money in a year.)

Danger will be integrated into Microsoft’s Entertainment and Devices division.


UPDATE: Om Malik of Giga Om is reporting his sources have indicated the actual price of the deal was $500m

Related Articles
Danger inc. Preliminary Prospectus filed with the SEC
Microsoft Bids for Yahoo: Aims for Internet Powerhouse
Yahoo to Reject Bid: What’s Next if it Happens
Blue Pulse Goes for Mobile Networks
MySpace Mobile
Google Android: A mobile blessing or curse?
Cellular Meets WiFi: UMA from T-Mobile

Comments are closed.