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Like Moths To Flame? Microsoft Acquires Firefly, Web Agent Leader

For all the huffing and puffing going on about Microsoft, one thing is certain--it's not afraid of acquiring Internet pioneers. The latest dip in the perpetual deal pool has them snagging Firefly for what we estimate could be as high as $250 million to $300 million.

Firefly's software technology works in the background matching user interests to information and products they may be interested in based on profiling technology. A marketer, for example, if you have a Firefly 'Passport,' may be able to tell that you like stocks, hiking, and reading--but without having to know your name, address and other personal details.

Selling you something doesn't require that kind of personal info--it requires knowing what you like or are interested in, and even the Web sites you've been to.

Cambridge, MA-based Firefly will move to the rainy skies of Seattle to participate in the frenzy. The deal follows Microsoft's string of buys in its post-interactive TV era beginning in 1995 when Bill Gates discovered that perhaps 100 million people on the planet would rather use e-mail than watch video on demand.

Other companies Microsoft has snatched up in its quest for a full Internet suite of offerings include:

Microsoft's Internet Acquisitions

Target Service Date
Firefly personalization agents 9-Apr-98
HotMail free email 31-Dec-97
Vxtreme streaming media 5-Aug-97
Linkage Software email connectivity 30-Jun-97
Coopers & Peters Java - object oriented UI 13-Jun-97
DimensionX Interactive media 7-May-97
WebTV Web via TV 6-Apr-97
Interse Website analysis software 3-Mar-97
Netcarta Web mgt. solutions 10-Dec-96
Resnova Mac-based Web software 20-Nov-96
Panorama Online analytical processing 29-Oct-96
Electric Gravity Online gaming 17-Jun-96
eShop ecommerce software 11-Jun-96
Colusa Software Internet programming 12-Mar-96
Vermeer FrontPage 16-Jan-96

One thing is clear here, Microsoft certainly puts its money where its mouth is. In December 1995, Gates gathered the geeks in Redmond for his now-famous proclamation that Microsoft is an Internet company, too. Some $100 billion market capitalization later it certainly is.

We estimate the above deals combined total more than $4 billion. But on the way they've allowed Microsoft to jump start its presence in a wide range of Internet offerings ranging from content to software and commerce to services.

The one observation that we can make here that seems appropriate--despite all the anti-trust concerns, the market share battles, the gesturing and posturing--is that at the end of the day Microsoft is doing more deals than anyone in this space. What's stopping its rivals from acquiring these firms? Cash, stock, what?

Any one of its rivals could be just as aggressive or more aggressive in this space, but they seem to be letting Microsoft do all the shopping itself to establish a future position at the apex of the Internet. That could be the biggest strategic mistake Microsoft's rivals make for the next decade.