Microsoft is a diversified company that has made an acquisition that appears to have failed to create any value. Identify and critically evaluate the rationale used by top management to justify the acquisition when it was originally made. Finally, determine why the acquisition subsequently failed.
(1) Identify and critically evaluate the rationale used by top management to justify the acquisition when it was originally made.
Microsoft has made many acquisitions over the years, and many of them have turned out to be extreme losers, in terms of profits. The Skype acquisition was another loser acquisition. There were so many problems with this, that many people in the business community actually wondered how Microsoft formulated their plan to think that it was a good idea to acquire Skype.
The main objective of Microsoft in making the acquisition with Skype was to work on a "shared goal of connecting all people across all devices and accelerating both companies' efforts to transform real-time communications for consumers and enterprise customers. The completion of the acquisition also marks the official introduction of Skype as a new business division within Microsoft" (Microsoft, 2012). Microsoft management evaluated the proposal, and believed that they could nicely expand their operations by adding the Skype segment. The mindset was that they could cater to a wider market of people. The more people that Microsoft is able to serve, the greater the chances are also that the company would be able to sell other Microsoft products to the customers.
Since Microsoft would be acquiring the Skype market, management assumed that this would open up even more avenues for Microsoft. In theory, they were ...
The solution provides a very detailed discussion regarding each part of the analysis based on the failed Microsoft acquisition of Skype.