Charge It to Ballmer's Centurion Card–It's Got a $6 Billion Limit
Lest there be any doubt that there is a bubble in the online advertising business, consider Microsoft’s planned purchase of aQuantive. After losing DoubleClick to Google, Right Media to Yahoo and 24/7 Real Media to WPP, Microsoft offered a jaw-dropping $6 billion in cash for aQuantive. That’s $66.50 a share–an 85% premium over the previous day’s selling price and about 14 times aQuantive’s 2006 revenues of $442 million. It’s also a hell of a lot more than the $3.1 billion Google paid for DoubleClick–10 times its $300 million revenue–which Don Dodge, the head of Microsoft’s emerging business team, criticized as being “way out of line” when it was first announced. Wonder how he feels about aQuantive’s $6 billion purchase price.
Regardless, Microsoft’s not sweating it a bit. “We’re happy with the price we paid. We believe it’s exactly the right company to buy, so we’re willing to pay the value we are paying today,” said company CFO Chris Liddell during a call with analysts today. “We will use the strength of our balance sheet when we think it’s necessary to drive growth going forward. This deal takes our advertising business to a new level. This allows us to take a bigger piece of that $40 billion pie that is still growing.”