The case for Microsoft buying Pandora

Yesterday a rumored buyout sent Pandora stock climbing, to hoots and jeers from market analysts. But is the idea so absurd?

Security analysts say a Microsoft acquisition of Pandora a "fairy tale," citing bad blood between Pandora CEO Brian McAndrews and Microsoft management. McAndrews, you may recall, was CEO of digital marketing firm aQuantive when Microsoft bought it for $6.3 billion in 2007. You may also recall that Microsoft took a $6.2 billion write-off in July 2012, finally admitting that aQuantive was a big mistake. McAndrews, the theory goes, is a pariah at Microsoft, and the chance of another McAndrews-Microsoft deal floats somewhere below zero.

I think that's a facile interpretation of a complex situation.

McAndrews took over as CEO of aQuantive in 1999. In the ensuing eight years, he built it into a powerhouse advertising company, rivaling DoubleClick in size and influence. Microsoft made the bid for aQuantive in May 2007, just a month after Google gobbled up DoubleClick. McAndrews stayed on with Microsoft as a senior VP for more than two years in order to lead the aQuantive absorption into Microsoft, then became a partner in the Madrona Venture Group in 2009. Pandora picked him as CEO just five months ago.

There's another Microsoft-Pandora connection. 

Just three days ago, Pandora announced it had hired Sara Clemens as its new chief strategy officer, replacing founder Tim Westergren in that role. Clemens, who now reports to McAndrews, has five years of experience at Microsoft, most recently working on expanding the reach of Xbox in both the domestic and international markets. 

Yes, that's Xbox as in Xbox Music, Microsoft's still-fumbling foray into the online music genre.

Coincidence? Sure, it could be. But I would note that many of the people directly involved in the aQuantive acquisition mess have long since left the building. I would also note that Microsoft CEO Satya Nadella was, at the time McAndrews joined Microsoft, in charge of online advertising. There was a span of several weeks where the organizational division between Nadella, McAndrews, and Microsoft legend Bill Veghte was, uh, less than clear.

Nadella and McAndrews have a long history of working together. Whether that translates into a bid for Pandora is anybody's guess, but I wouldn't dismiss the acquisition out of hand simply because of McAndrews's association with aQuantive. The situation's much more complex.

What's in it for Microsoft? Motley Fool Rick Munarriz summarized the case for acquisition five months ago when he said, "Microsoft would go from being a fledgling player in what is about to become a very crowded niche, to the king of the hill with Pandora in its arsenal."

What's in it for Pandora? Distribution! As Sara Clemens knows well, Xbox has made major inroads in international distribution, a learning experience that would suit Pandora well. Americans tend to forget that Pandora is only available, currently, in the United States, Australia, and New Zealand. International expansion is considered a top priority, and what better way to do so than with the folks from Redmond.

Don't be too surprised if Microsoft makes a bid for Pandora, sooner rather than later.

This story, "The case for Microsoft buying Pandora," was originally published at Get the first word on what the important tech news really means with the InfoWorld Tech Watch blog. For the latest developments in business technology news, follow on Twitter.