Steve Ballmer to spend $2B buying NBA team is a bad deal

The news came out yesterday that former Microsoft CEO Steve Ballmer has agreed to buy the Los Angeles Clippers of the National Basketball Association (NBA) for the unheard of sum of $2 billion.

If Ballmer took the time to ask any one of Microsoft’s more than 400,000 channel partners on this deal he would know by now to walk away.

For an executive who has crafted hundreds of major deals during his career including the historic IBM arrangement of 1981, this one for the NBA team would be his dumbest move.

The last NBA team to be sold was just a few months ago when the Milwaukee Bucks were acquired by a group of New York investors for $550 million. The Bucks had a book value of only $404 million. The current value of the LA Clippers is $575 million, according to Forbes magazine and that is middle of the pack in the 30-team NBA. Forbes also puts the Clippers’ operating revenue at a mere $15 million. I know the reason for buying a sports franchise has nothing to do with money.

The only reason the Clippers, who were originally founded in Buffalo as the Braves, got to the half billion dollar mark is because they are based in Los Angeles, the second largest North American market. A market, by the way, they share with more popular LA Lakers.

Why would Ballmer want to pay four times the Clippers’ market value? The word on the street is that Oprah Winfrey’s group was also bidding and pushed the sale price past a billion dollars.

Now people will say “so what, Ballmer is worth $20 billion and can easily afford the $2 billion”. That’s true but if that’s the case then why didn’t Ballmer outspend the New York investors for the Bucks? And in 2013 Ballmer with another partner wanted to acquire the Sacramento Kings team and move it to his home town of Seattle. Ballmer was ultimately not approved as an owner by the NBA. Both those deals were considerably cheaper if he wanted to buy a NBA team. If he wanted to buy any major sports franchise he could get the Phoenix Coyotes for just a measly $160 million.

An, again, why buy the Clippers? The LA Clippers, based on win-loss record, were named the worst North American sports franchise in the last 30 years by Sports Illustrated magazine. The Los Angeles Clippers have only made the playoffs four times in their entire history. Compare that to their in town rivals the Lakers, who have won 16 championship and 31 conference titles, the Clippers are a sad, sacked team.

And, there are other obstacles in this deal including a lawsuit from its current owner Donald Sterling, who doesn’t want to sell the team. Ballmer was sold the team from Sterling’s wife Rochelle, as the owner was banned for life for making racist comments by NBA Commissioner Adam Silver.

Why would Ballmer get himself into a bidding war for a historically bad team? My view is this: Ballmer exited Microsoft when the company was not on top of the market, unlike his pal Bill Gates who did leave the company when it was riding high. Winning an NBA championship, especially with the putrid Clippers franchise, would give Ballmer a success that would be unmatched in the business world.

Plus what else is he going to do? Fortune 500 CEO jobs don’t grow on trees.

One quick hit before I goCarousel Industries, a distributor of managed services, video solutions, data and visual communications, has hired Duke Lamb away from M&S Technologies.

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Jim Love, Chief Content Officer, IT World Canada

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Former editor of Computer Dealer News, covering Canada's IT channel community.

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