Search

Let’s give Steve Ballmer some credit

Jan 05, 2011

In October 2007, Microsoft (msft) agreed to buy a 1.6% stake in Facebook at a $15 billion valuation. Reaction from many quarters was withering:

  • PC Mag: "Whoever said the company is worth that much must be smoking something, including Microsoft, who paid millions for a tiny stake in it."
  • ValleyWag: "It's Microsoft executives, driven mad by Google and MySpace envy and determined not to miss out on the social-networking trend, who seem, well, a bit off."
  • All Things D: "Silicon Valley can now be considered to be at Delusional Level Red. Or green, given all the cash that is being shoved in Facebook’s direction now."
  • Forbes: "[Microsoft] forgets we are not 'eyeballs,' we are people. We aren't talking about column inches or gross rating points. We're talking about our reputations and the risks--privacy issues aside--of their inflation and potential devaluation. Even if Facebook could take that valuation and compensate us $15 billion for the use of our reputations, we would have to split that among 58 million other people. That's $258.62 per person. Are your friends and your reputation for sale for $258.62? We thought not. Facebook isn't worth $15 billion, either."

Well, it now seems the criticism was way off base.

Not only did the deal help Microsoft best Google for an ad revenue-sharing agreement with Facebook (i.e., strategic value), but the price seems like a bargain in light of Goldman Sachs agreeing to invest at a $50 billion valuation (i.e., financial value).

So let's give credit where credit is due. Not to Microsoft in general, but specifically to CEO Steve Ballmer.

Shortly after the deal was signed, I had a conversation about it with someone inside the Microsoft brain trust. He said that he and many others had opposed the deal, arguing that $15 billion was simply too high a price to pay (even if the actual investment dollars -- $240 million -- were chump change for Microsoft). But Ballmer was insistent, pushing forward over each and every objection.

I'm sure that the Facebook transaction details were worked out by member's of Microsoft's M&A team -- a busy group that year, including a $6 billion buy of aQuantive -- but the deal "lead" was unquestionably Ballmer. When he steps up to give his keynote speech later today at the Consumer Electronics Show, perhaps he should begin by taking a bow.

All products and services featured are based solely on editorial selection. FORTUNE may receive compensation for some links to products and services on this website.

Quotes delayed at least 15 minutes. Market data provided by Interactive Data. ETF and Mutual Fund data provided by Morningstar, Inc. Dow Jones Terms & Conditions: http://www.djindexes.com/mdsidx/html/tandc/indexestandcs.html. S&P Index data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Terms & Conditions. Powered and implemented by Interactive Data Managed Solutions