MS has dropped similar sums on other companies before.
(WebTV, Great Plains, etc)
In every case, the reason for the "high" price was that they weren't just buying the product or the company, but also signing up the staff for the long haul.
So, yes; $500 million is a lot if all MS was buying was the phone and the name, but not excessive if you think of it as signing up the people who made the Danger hip and successful to design the new UI for WM7.
Worth remembering: half a billion is a couple weeks' profits for MS.
