That thing about acquisitions

Yesterday Apple released its 2nd quarter earnings, and in the earnings call Apple CEO Tim Cook noted that Apple has acquired some 24 companies in the last 18 months, and plans to keep looking for opportunities. Seemingly every day, there’s news of a new acquisition on Techmeme, for example today’s announcement that Facebook is acquiring the company that makes Moves, a popular fitness tracking app. Companies both big and small are being snapped up by the likes of Apple and Facebook and Google, from the $18 billion WhatsApp acquisition to another Apple acquisition that barely rates a mention on Twitter.

So what’s that have to do with Microsoft? Certainly the Redmond company has made a few acquisitions of its own, most notably acquiring Nokia’s phones businesses in a deal that’s scheduled to close tomorrow. But aside from gaining new technologies and/or “acqui-hires”, Microsoft’s competitors have created something of a culture of a business cycle that includes creating a new company using Apple or Google technologies or aimed at Facebook, gaining venture capital, and then being acquired by those larger companies. It’s a popular and sometimes very profitable exit strategy.

At Build 2013, in a casual conversation with a Microsoft engineer with friends in the Valley, he explained that his friends were motivated to use Apple or Google technologies because they were chasing precisely that scenario, building their company to be bought by Apple or Google. This year at Build, after rumors surfaced that Microsoft was preparing to acquire Xamarin, which provides technologies to allow non-Microsoft systems to use .Net, it became one of the hot topics of conversation, and Xamarin founder Miguel de Icaza’s appearance on the Build keynote stage was one of the highlights of the event.

The acquisition, or even a partnership announcement, never took place (although the two companies did announce the formation of the .Net Foundation), and Microsoft just doesn’t seem all that interested in acquiring smaller companies, or promoting the use of Microsoft technologies in the way that Apple, Facebook, and Google do, through an acquisition strategy culture. We had hopes that Microsoft was going to begin to change that culture when it named Tony Bates the executive vice president of Microsoft’s “Business Development and Evangelism” group, but Bates has since left the company. Bates probably had more cachet among the Silicon Valley crowd than anyone in senior leadership at Microsoft, and seemed to be the right person to begin to make inroads into developing the kind of pipeline that Google and Apple have worked hard to encourage.

Can Microsoft succeed without an acquisition pipeline? Of course it can. Would a newfound culture of rewarding Microsoft focused companies like Xamarin with lucrative payouts help their cause? Just maybe it might.