Microsoft and Hotmail Case Study

...

the Windows service company are offering on the market. This event was given Microsoft an additional 6 million customers are using Hotmail.

The interests of the parties

Microsoft is facing many difficulties in the e-mail service as well as facing greater competitive rivals. For the acquisition of Hotmail - an e-mail service is being preferred. It will help the company solve problems and strengthen competitiveness and achieve the leading position in the field of e-mail.

With Bhatia and Smith, it will bring a lot of money for them and create conditions for a later career.

3. Negotiation process

The first time: Direct meeting at Hotmail headquater

Microsoft realized that Hotmail is on the upward trend on the market and Sabeer Bhatia also have an offer from his friend Alsavador about cooperating between two companies. Microsoft gave its 8 officers from Seattle, Washington to Hotmail. During the meeting, Sabeer Bhatia was presenting about the system map and the reports about Hotmail services, BillGates was not there so the meeting was also recorded. After the presentation, the trade leader of Microsoft, Kirl Thompson, said: Microsoft is really impressed about the success that Hotmail has made and offers 150 millions USD for take-over price. Even thought Hotmail’s employees attended the meeting were very happy with the bid price, Sabeer Bhatia calmly said no with this price, but no particular number was given. So Kirl Thompson and the group politely said goodbye.

The second time: On the phone

After 1 day, Kirl Thompson called from Seattle and offered a price of 250 millions USD to buy Hotmail. Within 24 hours, Microsofl raised the price from 150 to 250 millions USD, it is such a huge opportunity for Hotmail. But Sabeer still says no to the price.

The third time: Direct meeting at Bill Gates’s House

After 1 week, Sabeer Bhatia received an email from Kirl Thompson who wants to offer a meeting at Bill Gates’s house at Redmont, Washington on Monday. Sabeer and Alsavador took a punctual flight to Washington in the morning and had breakfast with Bill Gates at his house. Bill Gates wasnt say anything about Hotmail but sports. Then, He invited both his guests to go to his work room and had a meeting with Kirl Thompson, he talked about the technology news to make them comfortable and easy. Finally, he showed his impression about Hotmail and offer a price of 320 millions USD. Alsavador seems to be convinced but Sabeer politely smiled: “I hope that u will not reduce the price, it is the best product at this time”. Bill Gate was still smiling.

The fourth time: Decision

After 2 weeks since they met, Sabeer Bhatias’ co-workers were worryingly thinking about the 320 millions USD that could be gone.

At the moment, Kirl Thompson called Hotmail and annouced that: on the next Friday, their boss wants to meet them and willingly agrees with the price which is offer by Hotmail. And Microsoft would like Hotmail to bring their lawer and give Microsoft the time, date of the flight so they can welcome Hotmail to Microsoft.

Friday, 10am 23rd December 1997, Microsoft and Hotmail signed a record to sell the software right with 450 millions USD. The next Monday, Microsoft claimed on New York Stock market (NASDAQ) that Internet Explorer of Microsoft has free email service named Hotmail. Opening hour, Internet Explorer was evaluated around 6 billions USD but was up to 12 Billions USD at the closing hour the same day.

Factors affecting to the negotiations

- The negotiating environment

Negotiations have used a lot of the environment and different negotiation ways, including the headquarters of the two sides, direct negotiations, negotiating by phone, email. Hotmail is the proactive made initial proposal, but Microsoft is proactive selected the negotiating environment

- Predominance of the parties in the negotiation

In context of negotiations, Hotmail in a position be more active, by the holders of technology and is the owner of the service offered. This service at that moment being users very preferred and is gigantic step forward in the field of information technology.

However, for Microsoft, this group also has the great advantage of having a strong financial strength and it is the largest corporations in this field.

- Information

The negotiations mainly on price terms, however, the price of a service is difficult to assess, Hotmail does not offer a specific price is acceptable, so Microsoft was the lack of information and continuous given the high rates gradually to reach the level acceptable by both sides. However, as the large corporations in the field of information technology, Microsoft is who more than anyone else, understand the value and prospects of development of Hotmail, so Microsoft is the best corporations to assess this product.

- Time

Negotiations took place relatively rapid, within approximately 1 month, the two sides had agreed on plans to buy Hotmail service with gradually raising price from $ 150 million to $ 450 million, both Microsoft and Hotmail are shows persistence in negotiations

4. Tactics and strategies used in negotiations

Both parties have used the strategy of cooperation negotiations, both parties desire reach agreement, especially the Microsoft. Both sides were using gestures, words, positive, soft attitude, expressed the desire to cooperate. Although coming to an agreement in the first negotiation sessions, both parties have expressed a desire to work in the next time.

Negotiations to bring benefits to both parties, this party will benefit achieved on the basis of cooperation with the other side, both parties need each other, successful negotiations and mutually beneficial.

Both parties mainly use talking and fighting tactics. Microsoft by ascending the suggested price, and gradually stretch the time between negotiating sessions that has led to Hot Mail is convinced. Hot Mail also was the beginning of cooperation proposals, but kept relatively rigid views about the price, but still soft in negotiations. In addition, Microsoft also used the tactic to distract, by Bill Gates friendliness of chat in the areas of daily life with two young leaders of Hot Mail in the first meeting was to create goodwill, even when they are not closing the deal price, but both sides have created sympathy well, as the basis for subsequent

...