Microsoft rumored to be interested in acquisitive growth as it looks to capitalize on growing industry demand
By Quantum Capital Fund
There are different approaches to growth that a company can take in order to achieve diversification of its products and services. The first approach is organic growth where a company spends generously on research and development in order to build the company’s skill base which would allow the company to offer a new product or service. This, however, can only be achieved if there are existing skills within the company. If there are no existing skills, the company will need to take the acquisitive approach to growth whereby it acquires another company for its core skills and product/service offering.
This is the situation which is currently facing Microsoft, which is rumored to be in the market to purchase Barnes & Nobel’s Nook Media assets for as much as $1-billion. Nook Media is the venture that Barnes & Noble created last year. At that time, it was known as NewCo. Nook Media includes Barnes & Noble's Nook devices, online bookstore, e-content publishing and college business.
This may give Microsoft an opportunity to grow not only its online media content, but also its product offering. Reports indicate that even though sales of Nook tablets are down, content sales are up. Barnes & Noble officials say the Nook digital bookstore service contains about a 25% share of the total e-book market and 35% share of the digital magazine subscription market in the US. This means that Microsoft can manufacture a Surface e reader which could compete with Amazon and Apple on the book publishing front.
Growth is driven by demand. Since 2000 there has been a steady movement away from traditional publishing platforms such as books, newspapers and magazines to online media. Demand has seen the popularity of Amazon’s Kindle surpass expectations that the company had for the product. Microsoft needs to make sure that it does not find itself in the same position as the BlackBerry’s and the Nokia’s of the world which stood by and watched as rivals took advantage of demand driven growth in the market. Although Microsoft would be late in launching an e-reader, it is definitely a case of better late than never.