In an opinion piece published on The Street, Jonathan Yates argues that Microsoft’s next big acquisition should be … Madison Square Garden. Yes, the famous sports arena in New York City. Seriously.
“When the time is right, Microsoft should next go after Madison Square Garden (MSG), owner of ‘the world’s most famous arena.’ Along with the legendary events arena, the company would bring basketball’s New York Knicks, hockey’s New York Rangers, a media segment and other valuable assets,” he writes.
To quote Microsoft co-founder Bill Gates, “That’s the stupidest f-ing idea I’ve ever heard.”
Yates argues that a Madison Square Garden purchase would provide a good return on investment for Microsoft, given the continually-growing real estate market in New York, and the value of the venue’s sports franchises and event business. He argued that a MSG purchase would pay for itself because of the “billions in publicity” Microsoft would gain from plastering its name in and around MSG.
In addition, he said that the purchase would make Microsoft look cooler than Apple, which just picked up some major cool points by buying Beats, and hiring Dr. Dre and Jimmy Iovine.
While I can’t really argue with his points about MSG’s financial value, I’m not sure that the purchase would have the effect Yates believes it would. Safeco isn’t suddenly edgy and cool because they’ve named the Mariners’ ballpark. AT&T doesn’t seem like the sort of company I’d want to sit down and watch a game with because it’s their name outside Willie Mays Plaza in San Francisco.
Microsoft doesn’t have to be as cool as Apple. In fact, many of Microsoft’s businesses just aren’t cool. Office and SQL Server aren’t status symbols, but they’re incredibly important in the business world. I think that Microsoft needs to be concerned about competition from Apple and other companies, but buying a sports arena isn’t going to suddenly convey benefits like a popular cloud services platform, or a search engine people want to use.
But there’s another reason that Yates gives, after the article’s page break.
“Here’s another factor that is more of a concern: It will prevent Microsoft from doing something stupid with the money,” Yates writes.
“Microsoft had to write off the entire $6.3 billion it spent for aQuantitative, an Internet marketing firm. Most tech mergers and acquisitions do not work. According to research from KPMG, about 90% of mergers and acquisitions fail.”
So wait, let me get this straight: buying Madison Square Garden, for whatever exorbitant sum that might cost, is a good idea because it keeps Microsoft from buying a tech company? The way Yates sees it, Microsoft made a bad deal in 2007, so it should spend money on a sports stadium. Really.
Sometimes, deals – even really big ones – go bad. Apple’s Beats acquisition could turn out to be a total flop. Facebook’s purchase of Oculus VR could easily go sideways. But companies don’t make acquisitions because they’re always a sure thing. They make acquisitions because they believe the company and talent being acquired will benefit their business.
At this time in its history, Microsoft needs to be investing in its core businesses, and working to develop new products. Madison Square Garden would be a distraction from Satya Nadella’s vision of a “mobile-first, cloud-first” company that is moving forward in a shifting technology market. Sure, MSG would bring in some nice revenue, but that’s its biggest benefit to Microsoft’s empire. There are plenty of actual companies out there that could help the Redmond-based company be a better Microsoft, and they ought to be much higher on the shopping list.