Microsoft’s partnership strategy: we’ll take what we can get

Microsoft’s $ 300 million investment in Barnes & Noble’s Nook business gives the company a piece of an ebook reader also-ran. The Nook represents about 27 percent of the market after Amazon, which claims 50 percent to 60 percent of the market by comparison. Of course one could argue that 27 percent is better than nothing, which is pretty much where Microsoft is now in that particular arena.

The news prompted skepticism in many quarters.

Our world has changed so much that the two hated monopolists of the 1990s – Microsoft and B&N – must cling together to even stay relevant.—
Dennis K. Berman (@dkberman) April 30, 2012

Portable devices — whether they’re pen-based tablets or e-readers — have long been a weak point for Microsoft. This despite the near constant flogging years ago by company execs for pen-based Windows devices. The result? Apple’s iPad ran away from the pack and remains the dominant choice for people who actually will pay money for a tablet device.

This isn’t the first time Microsoft turned to a weak player in order to shore up its own entry into a faltering business. Here are a few more examples.

Nokia for smartphone smarts

Microsoft’s alliance with Nokia announced in February 2011, raised eyebrows. Nokia, which early on had dominated in mobile phone handsets for years, had by then lost its mojo in high-end phones to Apple and Google. And Microsoft, despite several tries at a Windows phone OS, was a blip on the radar. At the time GigaOM’s Bobbie Johnson said the deal could be viewed in two ways:

Is it the world’s most powerful software company and the world’s biggest handset manufacturer joining forces? Or is it two lumbering giants with serious weaknesses linking arms to try to weather the storm together?

Most people would have said the latter. The new Windows 8 phone has been well reviewed, but there is still considerable skepticism that this combination can dislodge Apple. There is some thought that Google’s acquisition of Motorola Mobility could spark other handset makers to defect from Android to Windows, however.

Yahoo for Web search and content trove

In 2008, Microsoft CEO Steve Ballmer wanted Yahoo — mostly for Internet search to help against Google, but also for its content — IN A bad WAY. So bad he launched a $ 44.6 billion buyout bid which, luckily for him, didn’t work out since Yahoo is now worth far less than that. A year later Microsoft cut a deal with a new Yahoo CEO that gave it access to Yahoo’s still-very-popular online news, finance, sports, entertainment sites and made Microsoft Bing the default search engine for Yahoo.com.

Microsoft’s Bing will become the default search engine on Yahoo.com, and Yahoo will eventually take over the ad inventory on all Bing search results, eliminating complexity for advertisers (and internal overhead). In terms of Google search, however, the Microosft-Yahoo team hasn’t made much of a dent.

Facebook for social media savvy

In what may be the exception that proves this particular rule, Microsoft now seems very prescient for making a $ 240 million investment Facebook in 2007. That money gave Microsoft a 1.6 percent stake in the social media phenom which put the valuation of Facebook at $ 15 billion. The latest valuations for Facebook, which is slated to go public later this year, are in the $ 75 billion to $ 100 billion range. Microsoft uses Facebook to promote Bing search and maps, which, given Facebook’s 8 million plus users, can only help raise Bing’s profile and limit Google’s growth potential. Still, after all that, the Microsoft-Yahoo partnership hasn’t dinged Google’s search share.

Photo courtesy of Flickr user ToddABishop

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