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Sunday, February 24, 2008

Staring down the wrong barrel, Ballmer?

So here you’ve got an interesting twist in the boringly slow Microsoft-Yahoo (mis)match. Randall Stross of NYT echoes the sentiments expressed by MIT professor Michael Cusumano in goading MSFT to “go stalk SAP” instead of Yahoo!

As far as the reasons go, Cusumano says it’s useless to pursue an outmoded, declining internet asset at a premium. MSFT could do well to focus on enterprise software segment where it has a major presence. He points to Oracle’s strategic acquisitions and its impressively regular, prudent use of capital to “roll up firms with similar products and customers to its own.” All of its 13, 13 and 11 acquisitions made by Oracle in 2005, `06 and `07 have been linear to its own LOB and at reasonable valuations. But he acknowledges that it’s hard not to be distracted by the buzz surrounding the internet crowd across the street and goes on to admire Oracle all the more for that. The Cusumano gospel wraps it up in a one-line strategy checklist for MSFT - to find the best acquisition strategy, ask, “What would Larry [Ellison] do?” The Stross warning follows – “If Microsoft tries to fight Google with wobbly legs, scared witless, it will lose”.

But then Dan Farber and Larry Dignan differ.

My money sense suggests Ballmer would be better off if he dumps all acquisition ideas in Ether and heads to the real (estate) world. He’ll get it for a lot less now. $44.6 billion is a lot of cash and he can use it to buy foreclosed real estate across Sacramento, CA or an entire Slavic village in Cleveland, Ohio on the cheap. The bet is much safer.

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